Gautam Kumar Mitra, Kolkata V. DCIT, Circle - 54, Kolkata, Kolkata

ITA 7/KOL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4852 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 11-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 02-01-2012
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEN ADD L
• Assessee Lawyers: A K TIBREWAL
• Keywords: Depreciation; Search and seizure; Source of fund; Revised return
• Section: 145; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 07/KOL/2012 ASSESSMENT YEAR : 2006-0 7 SRI GAUTAM KUMAR MITRA -VS.- D.C.I.T., C IRCLE-54, KOLKATA KOLKATA [PAN : AIGPM4864N) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI A.K.TIBREWAL, FCA & SHRI AMIT AGARWAL, ADVOCATE FOR THE RESPONDENT : SHRI SALLONG YADEN, ADD L.CIT.SR.DR DATE OF HEARING : 11.04.2016. DATE OF PRONOUNCEMENT : 11.05.2016. PER N.V.VASUDEVAN, JM ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 27.10.2011 OF CIT(A)- XXXVI, KOLKATA, RELATING TO AY 2006-07. 2. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) WHEREBY HE CONFIRMED THE ORDER OF THE AO IMPOSING PENALTY ON T HE ASSESSEE U/S.271(1) (C) OF THE INCOME TAX ACT, 1961 (ACT). 3. THE ASSESSEE IS AN ADVOCATE BY PROFESSION. DUR ING THE PREVIOUS YEAR HIS SOURCES OF INCOME WAS INCOME FROM PROFESSION, INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, SHORT TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES (INTEREST ON SB ACCOUNT). THE ASSESSEE FILED HIS RETURN OF INCOME FOR AY 2006-07 ON 31.10.2006 DECLARING TOTAL INCOME OF RS.88,96,850/-. ALONG WI TH THE RETURN OF INCOME, THE ASSESSEE FILED AUDIT REPORT REQUIRED TO BE FILED U/S.44AB OF THE ACT, AND ALSO AUDITED PROFIT AND 2 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 2 LOSS ACCOUNT AND BALANCE SHEET AS ON 31.3.2006. A FIRM OF CHARTERED ACCOUNTANTS BY NAME A.K.BARMAN & ASSOCIATES, ADVISED THE ASSESSEE IN THE MATTER OF FILING RETURN OF INCOME. THE SAID FIRM FURNISHED THE AUDIT REPORT U /S.44AB OF THE ACT TOGETHER WITH THE AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET A S ON 31.3.2006. IN FACT THE COMPUTATION OF TOTAL INCOME, A COPY OF WHICH IS AT PAGE-2 OF THE ASSESSEES PAPER BOOK, WAS SIGNED NOT BY THE ASSESSEE BUT BY THE PARTNER O F THE CHARTERED ACCOUNTANTS FIRM ONE MR.ANJAN KUMAR BARMAN. 4. IN THE ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT, THE ASSESSEE WAS REPRESENTED BY ANOTHER FIRM OF CHARTERED ACCOUNTANTS VIZ., GHOSAL, BASU AND RAY, BECAUSE THE SERVICES OF THE EARLIER CHARTERED ACCOUNTANT WERE NO LONGER AVAILABLE. THE FIRST HEARING BEFORE THE AO TOOK PLACE ON 24.10.2008. ON THAT DATE ONE OF THE PARTNER OF THE NEWLY APPOINTED CHARTERED ACCOUNTANTS FIRM ONE MR.B.MAJU MBDAR ATTENDED THE HEARING BEFORE THE AO ON 24.10.2008. IN THE LIABILITY SIDE OF THE BALANCE SHEET AS ON 31.3.2006 THERE WAS AN ITEM OF LIABILITY UNDER THE HEAD SECU RED LOAN STANDARD CHARTERED BANK (O/D A/C.) OF RS.25,48,385.37 PS. THE AO CALLED UP ON THE AUTHORISED REPRESENTATIVE (A/R) OF THE ASSESSEE TO FURNISH THE DETAILS OF THE OD ACCOUNT. THE ASSESSEES A/R VIDE HIS LETTER DATED 21.11.2008 STATED THAT THE FI GURES APPEARING IN THE BALANCE SHEET/PROFIT AND LOSS ACCOUNT SUBMITTED ALONG WITH THE RETURN OF INCOME WAS NOT CORRECT AND A RECONCILIATION OF THE SAID FIGURES WAS BEING GIVEN. THE SAID RECONCILIATION IS GIVEN AS ANNEXURE-1 TO THIS ORDER. 5. THE RECONCILIATION SHOWED THAT THERE WAS IN FAC T NO O/D IN BANK ACCOUNT BUT THERE WAS A FAVOURABLE BANK BALANCE OF RS.25,48,456.33 PS . THE ASSESSEE ALSO GAVE THE REVISED PROFIT AND LOSS ACCOUNT AFTER RECTIFYING CE RTAIN MISTAKES IN THE EARLIER PROFIT AND LOSS ACCOUNT. THE NET EFFECT AFTER CARRYING OUT AL L RECTIFICATION WAS THAT THE INCOME OF THE ASSESSEE STOOD INCREASED BY RS.19,58,731.46 PS. THE REVISED PROFIT AND LOSS ACCOUNT SO FILED BY THE ASSESSEE IS GIVEN AS AN ANNEXURE-2 TO THIS ORDER. 3 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 3 6. THE AO ACCEPTED THE SAID RECONCILIATION AND ADD ED A SUM OF RS.19,58,731.81 PS. TO THE TOTAL INCOME OF THE ASSESSEE. THE FOLLOWING WE RE HIS OBSERVATIONS: 1.1 RECONCILIATION OF INCOME AND EXPENDITURE ACCOUN T AND BALANCE SHEET: DURING THE COURSE OF FIRST HEARING THE AUTHORISED REPRESENTATI VE WAS REQUESTED TO FILE THE DETAILS OF, AMONG OTHERS, THE OVERDRAFT ACCOUNT WITH STANDARD C HARTERED BANK SHOWN IN THE BALANCE SHEET. THE AUTHORISED REPRESENTATIVE VIDE HIS LETTE R DATED 21.11.2008 STATED THAT FIGURES APPEARING IN THE BALANCE SHEET! INCOME AND EXPENDIT URE ACCOUNT SUBMITTED ALONG WITH THE RETURN OF INCOME WAS BEING RECONCILED. ON 16.12.200 8 THE AUTHORISED REPRESENTATIVE FILED A REVISED BALANCE SHEET AND INCOME & EXPENDITURE AC COUNT ALONG WITH RECONCILIATION WITH THE ONES SUBMITTED EARLIER BY THE ASSESSEE. THE REV ISED BALANCE SHEET SHOWED THAT THE ASSESSEE DID NOT HAVE ANY OVERDRAFT AS SHOWN IN THE EARLIER BALANCE SHEET; IT WAS ACTUALLY A FAVORABLE BALANCE IN THE BANK SHOWN AS HAVING AN OV ERDRAFT. THE REVISED INCOME AND EXPENDITURE ACCOUNT REFLECTED AN EXCESS OF SHORT TE RM CAPITAL GAIN OF RS. 35,090.59 AND PROFIT FROM SALE OF A PROPERTY AT DELHI TO THE TUNE OF RS. 16,24,800/-. IT WAS FURTHER SEEN THAT AN EXCESS OF RS. 1,12,129/- & RS. 3,19,176/- W ERE DEBITED TO THE EARLIER INCOME & EXPENDITURE ACCOUNT TOWARDS BANK INTEREST AND EXPEN SE ON REPAIRS AND MAINTENANCE. DUE TO REVISION THE DEPRECIATION WAS INCREASED BY RS. 1 ,32,463.65 (A REVISED CHART OF FIXED ASSETS WAS ALSO SUBMITTED. AS A WHOLE, THE NET EFFE CT OF RECONCILIATION OF THE INCOME & EXPENDITURE ACCOUNT WAS AN ENHANCEMENT OF NET PROFI T BY RS. 19, 58,731.81. 1.2 RECONCILIATION OF THE INCOME & EXPENDITURE ACCO UNT SHOWED THAT IF THE ASSESSEE CONCEALED HIS INCOME AND ALSO FILED INACCURATE PAR TICULARS OF INCOME IN RESPECT OF CAPITAL GAIN FROM SALE OF MUTUAL FUND/ IMMOVABLE PROPERTY B ANK INTEREST EXPENSES ON REPAIR AND MAINTENANCE. PENALTY PROCEEDINGS U/S 271(1) (C) IS THEREFORE BEING INITIATED SEPARATELY. 7. THE NEXT ISSUE BEFORE THE AO WAS WITH REGARD T O THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE ASSESSEE HAD LET OUT HIS PROPERTY AT MUMBAI TO N/S.BBC WORLD (INDIA) PVT.LTD ., (BBC). THE RENT ACTUALLY RECEIVED BY THE ASSESSEE WAS RS.42,446/- , INCLUDIN G TDS OF RS.6,494/-. THE ASSESSEE ALSO RECEIVED ANOTHER SUM OF RS.4,376 AS MISCELLANE OUS RECEIPTS IN THE NATURE OF RENT. THE ASSESSEE IN HIS RETURN OF INCOME HAD DECLARED A SUM OF RS.37,321 UNDER HEAD INCOME FROM HOUSE PROPERTY. THIS WAS ARRIVED AT BY THE ASSESSEE AS FOLLOWS: RENT RECEIVED RS.53,316 LESS: DEDUCTION U/S.24 RS.15,995 RS.37,321 THE RENT RECEIVED OF RS.53,316/- WAS ARRIVED AT BY THE ASSESSEE AS FOLLOWS: (A) AMOUNT OF RENT CREDITED BY BBC WORLD (INCLUDING TDS OF RS.3,247) RS.21,223 4 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 4 (B) DITTO - RS.21,223 (C) AMOUNT OF TDS FOR WHICH PAYMENT NOT RECEIVED DURING THE YEAR, BUT FOR WHICH TDS CREDIT CLAIMED RS. 3,247 (D) - DITTO- RS. 3,247 (E) MISCELLANEOUS RECEIPT RS. 4,376 RS.53,316 8. IT CAN BE SEEN FROM THE ABOVE THAT THE ASSESSEE HAD ACCOUNTED FOR AS INCOME THE TDS IN RESPECT OF WHICH PAYMENT OF RENT WAS RECEIVED AS WELL FOR RENTS NOT RECEIVED DURING THE YEAR BUT FOR WHICH HE HAD TAKEN CREDIT ON THE B ASIS OF CERTIFICATE RECEIVED. THE ASSESSEE HAD GIVEN ALL THE DETAILS OF RENT RECEIVED LEDGER ACCOUNT PRINT OUT ALONG WITH THE LETTER DATED 21.11.2008 FILED BEFORE THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. 9. THE AO HOWEVER FOUND FROM THE TDS CERTIFICATE I SSUED BY M/S.BBC WORLD (INDIA) PVT.LTD., THAT THE RENT FOR THE PROPERTY AT MUMBAI FOR THE PREVIOUS YEAR WAS RS.84,892/-. (WHICH INCLUDED RENT PAID AS WELL AS RENT PAYABLE B UT NOT PAID). THE AO WAS OF THE VIEW THAT THE RENT FOR THE PREVIOUS YEAR WHETHER RE CEIVED OR NOT OUGHT TO BE ACCOUNTED AS INCOME FROM HOUSE PROPERTY. HE ACCORDINGLY COMPUTE D INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS FOLLOWS: RENT RECEIVED RS.84,892 LESS: DEDUCTION U/S.24 (-) RS.25,468 RS.59,424 THUS THERE WAS AN ADDITION OF RS.22,103 TO THE TOTA L INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 10. THE NEXT ISSUE BEFORE THE AO WAS WITH REGARD T O EXPLANATION WITH REGARD TO UNSECURED LOANS APPEARING IN THE REVISED BALANCE SH EET FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS BY THE ASSESSEE BEFORE THE AO. THERE W AS UNSECURED LOAN IN THE LIABILITY SIDE OF THE BALANCE SHEET OF RS.1,71,67,483/-. THE ASSESSEE EXPLAINED SOURCES OF THE 5 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 5 SECURED LOANS TO THE EXTENT OF RS.1,49,10,200 AS ON E FROM HIS WIFE SMT.RINA MITRA AND ANOTHER SUM OF RS.17,00,000 AS LOAN FROM SHRI CHAND RANATH MUKHERJEE. WITH REGARD TO THE REMAINING UNSECURED LOANS TO THE TUEN OF RS.5,5 7,283.43/-, THE ASSESSEE DID NOT FILE ANY DETAILS. THE AO THEREFORE ADDED THE AFORESAID SUM AS UNEXPLAINED LOAN AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S.68 OF THE ACT. 11. THE NEXT ISSUE BEFORE THE AO WAS WITH REGARD T O CREDITORS FOR LIABILITIES SHOWN IN THE REVISED BALANCE SHEET FILED IN THE COURSE OF AS SESSMENT PROCEEDINGS BY THE ASSESSEE BEFORE THE AO. THE ASSESSEE HAD SHOWN A SUM OF RS. 97,21,092.75 AS CREDITORS. ON SCRUTINY OF THE DETAILS FILED BY THE ASSESSEE IN TH IS REGARD THE AO NOTICED THAT A SUM OF RS.89,33,450 OUT OF THE ABOVE REPRESENTED PROFESSIO NAL FEES PAYABLE TO BARRISTERS, AUDIT FEE PAYABLE, OUTSTANDING SALARIES AND WAGES AT THE END OF THE FINANCIAL YEAR AND OTHER LIABILITIES FOR VARIOUS EXPENSES. THESE WERE LIABI LITIES FOR WHICH THE ASSESSEE HAD MADE PROVISION IN THE PROFIT AND LOSS ACCOUNT. THE ASSE SSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. UNDER THE CASH SYSTEM OF ACCOUNTING, IN COME ACTUALLY RECEIVED HAS TO BE DECLARED AS INCOME AND EXPENSES ACTUALLY INCURRED C OULD BE CLAIMED AS DEDUCTION. EXPENSES ACTUALLY NOT PAID COULD NOT BE CLAIMED AS DEDUCTION. THE AO THEREFORE CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO HOW THE ABOVE ITEMS OF EXPENDITURE WERE CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM PR OFESSION. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE ASSESSEE ENSURED DEDUCTION O F TAXES UPON RECEIPT OF THE RELEVANT BILLS FOR EXPENSES AND DEPOSITED THE SAME WITH GOVE RNMENT ACCOUNTS IRRESPECTIVE OF WHETHER PAYMENTS AGAINST THE BILLS WERE MADE OR NOT . SINCE THE TAX DEDUCTED AT SOURCE ON THE AFORESAID EXPENDITURE WHICH WAS NOT PAID WAS DEPOSITED INTO THE GOVERNMENT ACCOUNT, THE ASSESSEE CLAIMED THAT IT COULD CLAIM T HE EXPENDITURE IN QUESTION AS DEDUCTION EVEN UNDER THE CASH SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. 12. THE AO HOWEVER REJECTED THE ABOVE ARGUMENT AND HE HELD AS FOLLOWS: 13.3. I HAVE VERY CAREFULLY PERUSED THE CONTENTION OF THE AUTHORISED REPRESENTATIVE, BUT, I AM AFRAID, I CANNOT MAKE MYSELF AGREE WITH THE SAME . SECTION 145 OF THE I TACT, 61 AS IT 6 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 6 STANDS AMENDED WITH EFFECT FROM 01. 04.1997, UNEQUI VOCALLY PRESCRIBES THAT THE INCOME CHARGEABLE UNDER HEAD 'PROFITS AND GAIN OF BUSINESS OR PROFESSION' HAS TO BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THERE CANNOT BE ANY HYBRID METHOD FOLLOWE D OR ALLOWED. EXCEPTIONS ARE AGAIN PROVIDED BY THE STATUTE ITSELF, FOR EXAMPLE, U/S 43 B OF THE I TACT, 61 WHEREIN IT IS PRESCRIBED THAT CERTAIN DEDUCTIONS MENTIONED THEREI N WOULD BE ALLOWED ONLY ON ACTUAL PAYMENT EVEN IF THE ACCOUNTS WERE PREPARED ON MERCA NTILE BASIS. HOWEVER, ACCOUNTS ARE TO BE PREPARED ONLY ON THE METHOD REGULARLY EMPLOYED. THESE PROVISIONS REGARDING METHOD OF ACCOUNTING OR STATUTORY EXCEPTIONS FOR COMPUTATI ON OF INCOME, HOWEVER, DO NOT FOUL WITH THE PROVISIONS OF DEDUCTION OF TAX, NEITHER WI TH THE PROVISIONS REGARDING ALLOWANCE OF CERTAIN EXPENSES ONLY ON THE BASIS OF TDS. THE PROV ISION FOR DEDUCTION OF TAX AT SOURCE UNDER CHAPTER XVII MAKE A PAYER OF CERTAIN NATURES OF PAYMENT LIABLE TO DEDUCT TAX AT SOURCE AT THE TIME OF CREDIT IN FAVOUR OF THE PAYEE OR AT THE TIME OF PAYMENT. WHICHEVER IS EARLIER. THE PROVISIONS DO NOT CALL FOR ANY DEDUCTI ON OF TAX AT SOURCE IF THE PAYMENT IS NOT ACTUALLY MADE IN THE CASES OF ASSESSES WHO EMPLOY C ASH BASIS OF ACCOUNTING .CONVERSELY, DEDUCTION HAS TO BE MADE AT THE TIME OF CREDIT EVEN WHEN ACTUAL PAYMENT IS NOT MADE WHEN ACCOUNTS ARE PREPARED ON MERCANTILE BASIS. THE DISALLOWANCE UNDER SECTION 40(A) OF THE I TACT, 61 IS TO BE MADE IF TAX IS NOT DEDUCTED AT THE TIME OF PAYMENT OR CREDIT, WHICHEVER IS EARLIER, DEPENDING UPON ASSESSES OWN M ETHOD OF ACCOUNTING. 13.5 OUR ASSESSEE WHO FOLLOWED CASH BASIS OF ACCOUN TING REGULARLY CANNOT PROVIDE FOR LIABILITIES AND WAS NOT REQUIRED TO DEDUCT TAX AT S OURCE ONCE PAYMENT WAS NOT ACTUALLY MADE. BY DEDUCTING TAX AND DEPOSITING THE SAME IN T HE GOVT. ACCOUNT, HIS LIABILITIES WITH RESPECT TO HIS CREDITORS HAVE ONLY LESSENED. BUT AC CORDING TO HIS OWN METHOD OF ACCOUNTING HE IS ENTITLED TO DEDUCTION OF THE AMOUN T OF LIABILITIES ,IN COMPUTING HIS INCOME AS LONG AS HE DOES NOT MAKE ACTUAL PAYMENT. THIS DI SALLOWANCE IS NOT IN TERMS OF SECTION 40(A)(IA) OF THE I TACT, 61. 13.6 THE AUTHORISED REPRESENTATIVE'S CONTENTION THA T ALLOWING OF AN EXPENSE WAS RELATABLE TO TDS IS NOT FULLY ACCEPTABLE. DISALLOWANCE DUE TO NON-COMPLIANCE OF TDS PROVISIONS CAN BE MADE ONLY IN THE CASES WHERE TDS PROVISIONS ARE ATTRACTED. BUT, DISALLOWANCE BECAUSE OF METHOD OF ACCOUNTING FOLLOWED HAS TO BE MADE EVEN WHERE TDS PROVISIONS ARE NOT ATTRACTED. 13.7 IN VIEW OF THE FOREGOING DISCUSSION I HAVE NO OTHER COURSE LEFT OPEN BUT TO DISALLOW THE PROVISION FOR LIABILITIES FOR EXPENSES TO THE T UNE OF RS. 89,33,450/- AND ADD THE SAME BACK TO TOTAL INCOME. SINCE THE ASSESSEE HAS CONCEA LED THIS INCOME, PENALTY PROCEEDINGS U/S 271(1)(C) IS BEING INITIATED SEPARATELY. 13. IN RESPECT OF THE AFORESAID FOUR ADDITIONS MAD E IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO INITIATED PENALTY PROCEEDINGS U /S.271(1)( C) OF THE ACT AND IMPOSED PENALTY VIDE HIS ORDER DATED 30.6.2009 . 7 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 7 14. THE EXPLANATION OF THE ASSESSEE IN THE PENALTY PROCEEDINGS ON THE VARIOUS ADDITIONS MADE IN THE ASSESSMENT ORDER WERE AS FOLLOWS: (I) ON THE ADDITION OF RS.19,58,731.81 PS. CONSEQUENT T O THE ASSESSEE FILING RECONCILIATION FIGURES BETWEEN THE ORIGINAL BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME AND REVISED BALANCE SHEET FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE DREW THE ATTENTION OF TH E AO TO THE FACT THAT THE SAME HAPPENED OWING THE ERRORS COMMITTED BY THE ERS TWHILE CHARTERED ACCOUNTANT. THE SAME WAS DETECTED BY THE CHARTERED ACCOUNTANT WHO REPRESENTED THE ASSESSEE IN THE ASSESSMENT PROCEEDI NGS BEFORE THE AO. THE ERRORS WERE DETECTED AND A REVISED BALANCE SHEET SH OWING ENHANCED INCOME OF RS.19,58,731.81 PS. WAS FILED BY THE ASSESSEE VOLUN TARILY IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME WAS ACCEPTED BY THE AO WITHOUT ANY OBJECTION. THE ASSESSEE THUS POINTED OUT THAT IT W AS NOT A CASE OF EITHER CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME BY THE ASSESSEE. (II) ON THE ADDITION MADE OF RS.22,103/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE ASSESSEE POINTED OUT THAT THE TDS CE RTIFICATES WERE FILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS AN D IT WAS FROM THOSE CERTIFICATES THAT THE AO CAME TO THE CONCLUSION THA T THE RENT RECEIVABLE BY THE ASSESSEE WAS RS.84,892 BUT ONLY RENT ACTUALLY RECEI VED OF RS.53,316 WAS DECLARED. THE FACT THAT THE ASSESSEE HAD INCLUDED AS INCOME THE TAX DEDUCTED AT SOURCE FOR RENT RECEIVABLE BUT NOT RECEIVED IN A RRIVING AT THE RENT RECEIVED WOULD CLEARLY SHOW THAT THERE WAS NO INTENTION WHAT SOEVER ON THE PART OF THE ASSESSEE TO CONCEAL ANY PARTICULARS OF INCOME OR TO FURNISH INACCURATE PARTICULARS THEREOF. IT WAS ONLY BECAUSE OF THE PR OVISIONS OF SEC.22 OF THE ACT WHICH LAYS DOWN THAT THE ANNUAL VALUE OF PROP ERTY CONSISTING OF ANY BUILDING OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER SHALL BE SUBJECT TO INCOME-TAX UNDER THE HEAD INCOME FRO M HOUSE PROPERTY AFTER CLAIMING DEDUCTION UNDER SEC. 24 OF THE ACT AND THE PROVISIONS OF SEC. 23(1) OF THE ACT, WHICH PROVIDES THAT THE ANNUAL VALUE OF ANY PROPERTY SHALL BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO BE LET OUT FROM YEAR-TO-YEAR OR THE RENT ACTUALLY RECEIVABLE WHICHE VER IS LOWER WILL BE TAKEN AS ANNUAL VALUE OF PROPERTY THAT THE ADDITION IN QU ESTION WAS MADE. IT WAS THEREFORE ARGUED THAT THERE WAS NO CONCEALMENT OF P ARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 8 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 8 (III) ON THE ADDITION OF RS. 5,57,283.43 PS. BEING UNEXPL AINED UNSECURED LOANS MADE U/S.68 OF THE ACT, THE ASSESSEE SUBMITTED THAT IN RESPECT OF ADDITION MADE U/S.68 OF THE ACT EXPLANATION 1 TO SEC.271(1) ( C ) OF THE ACT WOULD NOT BE APPLICABLE AND NO PENALTY COULD BE IMPOSED IN RE SPECT OF SUCH ADDITION. IN THIS REGARD THE ASSESSEE PLACED RELIANCE ON THE DEC ISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT 249 ITR 125 (GUJ.). (IV) ON THE ADDITION OF RS.89,33,450/- THE ASSESSEE POIN TED OUT THAT THE ADDITION IN QUESTION WAS MADE OWING TO THE METHOD OF ACCOUNT ING FOLLOWED BY THE ASSESSEE AND THAT THE GENUINENESS OF THESE EXPENSES WERE NEVER IN DOUBT. IN RESPECT OF SUCH ADDITION THERE CANNOT BE ANY INFERE NCE THAT THE ASSESSEE ATTEMPTED TO CONCEAL PARTICULARS OF INCOME OR FURNI SHED INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAD PLACED ALL PRIMARILY F ACTS BEFORE THE AO AND ALSO MADE A BONA FIDE CLAIM HOW THE DEDUCTION IN QU ESTION WAS TO BE ALLOWED AS A DEDUCTION. THE FACT THAT THE SAME WAS NOT ACC EPTED IN ASSESSMENT PROCEEDINGS CANNOT LEAD TO ANY ADVERSE INFERENCE IN SO FAR AS PENALTY U/S.271(1)( C) OF THE ACT. 15. THE AO HOWEVER REJECTED THE CONTENTION OF THE ASSESSEE. FOLLOWING WERE THE OBSERVATIONS OF THE AO: 5. FROM THE FOREGOING DISCUSSION IT IS CLEAR THAT THERE \WAS CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ONLY EXPLANATION ADVANCED ABOUT THIS UNDISPUTED FACT OF CONCEALMENT OF PARTIC ULARS OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME IS THAT THE SAME W AS COMMITTED BY THE ERSTWHILE ACCOUNTANT. THIS EXPLANATION CAN NOT ABSOLVE THE AS SESSEE OF HIS VICARIOUS RESPONSIBILITY. MOREOVER. THE ASSESSEE HAS NOT ADDUCED ANY PRIMA-FA CIE EVIDENCE TO SUBSTANTIATE THE CLAIM THAT THE ERRORS WERE COMMITTED BY SOMEBODY ELSE. NO R HAS BEEN ABLE TO PRO.VE THAT THE CLAIM WAS BONA-FIDE. HE HAS FAILED TO PROVE THAT AL L FACTS RELATING TO THE AMOUNTS ADDED BACK OR DISALLOWED WHICH ARE MATERIAL TO THE COMPUT ATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY HIM BEFORE THE INTERVENTION FROM THE R EVENUE. FACTS WERE ACTUALLY HIDDEN FROM THE VIEW AS WOULD BE APPARENT FROM THE DISTORT IONS LATER ON DETECTED IN THE ORIGINAL BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. PENALTY U/S 271 (1 )(C) OF THE ACT IS THEREFORE INNPOSABLE AS REGARDS CONCEALMENT AMOUNTING TO RS. 19,58,731.81. 6. REGARDING THE SECOND POINT OF CONCEALMENT OF INC OME FROM HOUSE PROPERTY. THE EXPLANATION FORWARDED IS THAT THE ADDITION MADE IN THE ASSESSMENT WAS NOT LAWFUL BECAUSE THE ASSESSEE FOLLOWED CASH BASIS ACCOUNTING, IT WAS STATED THAT THE ASSESSEE WOULD BE FILING A PETITION FOR RECTIFICATION U/S 154 IN DUE COURSE. 9 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 9 7. THE EXPLANATION FURNISHED BY THE AUTHORISED REPR ESENTATIVE IS BASED ON INCORRECT APPRECIATION OF LAW AS REGARDS CHARGING OF INCOME. FROM HOUSE PROPERTY. SECTION 145 WHICH PROVIDES FOR EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE IS APPLICABLE IN RELATION TO INCOME CH ARGEABLE UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION' OR 'INCOME FROM OT HER SOURCES'. THE COMPUTATION OF INCOME FROM LET OUT HOUSE PROPERTY IS TO BE MADE AS PER SECTIONS 23(B) & 23(C) WHICH PRESCRIBE ACTUAL RENT RECEIVED OR RECEIVABLE' AS T HE BASIS. THE ASSESSEES EXPLANATION IS THEREFORE UNACCEPTABLE. IT CAN NOT THEREFORE BE DE NIED THAT THERE HAS BEEN CONCEALMENT OF PARTICULARS OF INCOME IN RESPECT OF RENT IN THE ORI GINAL RETURN AND PENALTY U/S 271 (I )(C) IS IMPOSABLE. 8. REGARDING THE CONCEALMENT BY INTRODUCTION OF CAS H CREDIT IT HAS BEEN CLAIMED THAT PENALTY U/S 271 (I )(C) IS NOT IMPOSABLE IN VIEW OF THE RATIO DECINDI OF THE CASE OF NATIONAL TEXTILE VS. CIT (2001) REPORTED IN 249 ITR 125. I F IND THAT THE CASE REFERRED TO IS NOT IDENTICAL. IN THE QUOTED CASE THE ASSESSEE OFFERED AN EXPLANATION DURING THE QUANTUM PROCEEDINGS THAT CERTAIN TEMPORARY LOANS WERE ARRAN GED BY ASSSESSEES FORMER ACCOUNTANT WITH WHOM RELATION LATER ON GOT STRAINED AND THAT I S WHY THE ASSEESSEE WAS UNABLE TO FURNISH EVEN THE ADDRESSES OF THE PARTIES. IN THE C ASE OF OUR ASSESSEE, INITIALLY UNSECURED LOAN WAS SHOWN AT RS, 62,36,225/- IN THE ORIGINAL A CCOUNT. ON RECONCILIATION OF THE ACCOUNT THE UNSECURED LOAN BECAME RS. 1,71,67,483.4 3 OF WHICH RS. 5,57,283.43 WINS SHOWN AS 'LOAN OTHERS'. THERE WERE TWO OTHER LOANS IN RESPECT OF WHICH THE ASSESSEE PRODUCED CONFIRMATIONS; BUT ABOUT 'LOAN OTHERS ' TH E ASSESSEE CHOSE TO REMAIN SILENT WITHOUT OFFERING ANY EXPLANATION ABOUT THE IDENTITY OF THE LOAN GIVERS, NOT TO SPEAK OF THEIR CREDIT WORTHINESS. EVEN DURING THE PENALTY PROCEEDI NGS THE ASSESSEE DID NOT COME FORWARD WITH ANY EXPLANATION THAT THAT ACTUALLY WERE SOME L OAN GIVERS. 9. I HOWEVER THAT THE RATIO OF THE CASE IS REALLY A PPLICABLE IN THE CASE OF THE ASSESSEE TO PROVE THE POINT OF CONCEALMENT BY THE ASSESSEE. I Q UOTE FROM THE ORDER- 'IN ORDER TO JUSTIFY THE LEVY OF PENALTY TWO FACTORS MUST CO-EXIST I) TH ERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSESSEE'S INCOME. IT IS NOT ENOUGH FOR THE PURPO SE OF PENALTY THAT THE AMOUNT IS ASSESSED AS INCOME AND II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMU S, I.E . CONSCIOUS CONCEALMENT OR ACT OF FURNISHING INACCURATE PARTICU LARS ON THE PART OF THE ASSESSEE NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANC ES ARE EQUALLY C01LSISTEMRE WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONC EALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES ALL EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E., IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S CASE IS FALSE , THE EXPLANATION CAN NOT HELP THE DEPARTMENT BECAUSE THERE IS NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. 10. IN THE CASE OF OUR ASSESSEE THERE WAS NO EXPLAN ATION OFFERED WHICH WAS REQUIRED TO BE DISPROVED AND ALL FACTS AND CIRCUMSTANCE NARRATED I N PARA 8.1 LEAD TO THE ONLY REASONABLE CONCLUSION THAT THE. AMOUNT REPRESENTS ASSESSEE'S I NCOME AND THERE WAS A CONSCIOUS CONCEALMENT AND ACT OF FURNISHING INACCURATE PARTIC ULARS ON THE PART OF THE ASSESSEE. THERE 10 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 10 WAS A DELIBERATE ATTEMPT TO HIDE ASSESSEE'S OWN IN COME BEHIND THE SHELTER OF NON EXISTENT 'OTHERS '. PENALTY U/S 271(1)(C) IS THEREFORE IMPOS ABLE IN THE CASE OF THE ASSESSEE. 11. REGARDING ADDITION OF RS. 89,33,450/- ON THE B ASIS OF METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE IT HAS BEEN CONTENTED THAT I) MERE DISALLOWANCE OF AN EXPENSE DOES NO T AUTOMATICALLY PROVE THAT THE INCOME HAS B EEN HIDDEN FROM VIEW; II) THE ASSESSEE DOES NOT FALL WITHIN THE MISCHIEF OF EXPLANATION I TO SEC 271(1)(C); III) IT WOULD NOT BE JUSTIFIABLE TO HOLD THAT THE EXPLANATION OFFERED BY THE ASSESSEE DURING THE COURSE OF SCRUTINY FOR CLAIMING THE EXPENSES COULD NOT BE SUB STANTIATED JUST BECAUSE THE REVENUE DID AGREE WITH THE SAME; AND THE QUESTION OF PROVING 'A LL FACTS' RELATING TO AMOUNTS ADDED BACK OR DISALLOWED DID NOT ARISE IN THE CASE OF THE ASSE SSEE BECAUSE: GENUINENESS OF THE SAME IS NOT QUESTIONED IN THE ASSESSMENT. 12. I HAVE PERUSED THE EXPLANATION GIVEN ABOVE BUT \BOLD THE VIEW THAT THE AFORESAID EXPLANATIONS DO NOT TAKE AWAY THE ASSESSEE FROM THE MISCHIEF OF PENALTY U/S 271 (I)(C) OF THE ACT. LET US AGAIN RECALL THE CIRCUMSTANCES THRO UGH WHICH THE CASE OF THE ASSESSEE HAS TRAVERSED. ASSESSEE FILED HIS RETURN OF INCOME AND THE ACCOUNTS IN SUPPORT OF THE SAME. AT THE INTERVENTION OF THE REVENUE WHEN THE PROCESS OF SCRUTINY STARTED THE ASSESSEE COMES OUT WITH REVISED ACCOUNTS. IN THE ORIGINAL ACCOUNTS NO CREDITORS FOR LIABILITIES FOR EXPENSES WERE SHOWN. ASSESSEE HAS BEEN MAINTAINING HIS ACCO UNTS CONSISTENTLY ON CASH BASIS AND IT WAS KNOWN TO HIM OR HIS ACCOUNTANT THAT NO EXPENSES WHICH ACTUALLY REMAIN UNPAID WERE ALLOWABLE IN CASH BASIS OF ACCOUNTING. EVEN THEN PR OVISIONS WERE MADE IN THE ACCOUNTS AND EXPENSES WERE CLAIMED THEREBY CONCEALING THE AC TUAL INCOME ACCORDING TO THE METHOD OF ACCOUNTING. HENCE, IT CANNOT BE VIEWED AS A CAS E OF MERE DISALLOWANCE. RATHER, IT IS A CLEAR CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR REDUCING HIS INCOME. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE ISSU E INVOLVED I CAN NOT BUT HOLD THAT PENALTY U/S 271 (1)(C) OF THE ACT IS IMPOSABLE ON T HIS ISSUE ALSO. THE TOTAL TAX SOUGHT TO BE EVADED BY CONCE ALMENT OF INCOME OF RS. 1,14,71,568/- [19,58,731.81 + 22,103/- + 5,57,283.43 + 89,33,450/ -] WAS RS. 34,41,471/-. CONSIDERING ALL FACTS AND CIRCUMSTANCES OF THE CASE I IMPOSE P ENALTY U/S 271(I)(C) @ OF 100% OF THE TAX SOUGHT TO BE EVADED, I .E. RS. 34,41,471/- AS PAYABLE BY THE ASSESSEE . 16. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRME D THE ORDER OF THE AO. HENCE THE PRESENT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 17. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED C OUNSEL FOR THE ASSESSEE AND THE LEARNED DR. THE LEARNED COUNSEL FOR THE ASSESSEE R EITERATED SUBMISSIONS AS WERE MADE BEFORE AO/CIT(A). THE LEARNED COUNSEL FOR THE ASSE SSEE ALSO DREW OUR ATTENTION TO THE SHOW CAUSE NOTICE ISSUED U/S.274 OF THE ACT BEFORE IMPOSING PENALTY AND SUBMITTED THAT 11 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 11 THE SAID NOTICE DOES NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULARS OF INCOME OR OF HAVING CONCEALED PARTICULARS OF SUCH INCOME. HE POINTED OUT THAT THE PRINTED SHOW CAUS E NOTICE DOES NOT STRIKE OUT THE IRRELEVANT PORTION VIZ., FURNISHED INACCURATE PART ICULARS OF INCOME OR CONCEALED PARTICULARS OF SUCH INCOME. HE DREW OUR ATTENTION TO A DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNA THA COTTON & GINNING FACTORY (2013) 218 TAXMAN 423 (KAR.) WHEREIN IT WAS HELD TH AT IF THE SHOW CAUSE NOTICE U/S.274 OF THE ACT DOES NOT SPECIFY AS TO THE EXACT CHARGE VIZ., WHETHER THE CHARGE IS THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF I NCOME OR CONCEALED PARTICULARS OF INCOME BY STRIKING OUT THE IRRELEVANT PORTION OF PRINTED SHOW CAUSE NOTICE, THAN THE IMPOSITION OF PENALTY ON THE BASIS OF SUCH INVALID SHOW CAUSE NOTICE CANNOT BE SUSTAINED. BESIDES THE ABOVE SEVERAL JUDICIAL PRON OUNCEMENTS WERE CITED BEFORE US FOR THE PROPOSITION THAT WHEN DISCLOSURE IS MADE BONA-F IDE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME IS ACCEPTED BY THE AO, NO PENALTY OUGHT TO BE IMPOSED. THE LEARNED DR RELIED ON THE ORDER OF THE REVENUE AUTHO RITIES. 18. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. AS FAR IMPOSITION OF PENALTY WITH REGARD TO THE ADDITION O F RS.19,58,732, THE SEQUENCE OF EVENTS WAS THAT THE FIRST HEARING BEFORE THE AO TOO K PLACE ON 24.10.2008. ON THAT DATE ONE OF THE PARTNER OF THE NEWLY APPOINTED CHARTERED ACCOUNTANTS FIRM ONE MR.B.MAJUMDAR ATTENDED THE HEARING BEFORE THE AO ON 24.10.2008. IN THE LIABILITY SIDE OF THE BALANCE SHEET AS ON 31.3.2006 THERE WAS AN I TEM OF LIABILITY UNDER THE HEAD SECURED LOAN STANDARD CHARTERED BANK (O/D A/C.) O F RS.25,48,385.37 PS. THE AO CALLED UPON THE AUTHORISED REPRESENTATIVE (A/R) OF THE ASSESSEE TO FURNISH THE DETAILS OF THE OD ACCOUNT. THE ASSESSEES A/R VIDE HIS LET TER DATED 21.11.2008 STATED THAT THE FIGURES APPEARING IN THE BALANCE SHEET/PROFIT AND L OSS ACCOUNT SUBMITTED ALONG WITH THE RETURN OF INCOME WAS NOT CORRECT AND A RECONCILIATI ON OF THE SAID FIGURES WAS BEING GIVEN. THE RECONCILIATION SHOWED THAT THERE WAS IN FACT NO O/D IN BANK ACCOUNT BUT 12 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 12 THERE WAS A FAVOURABLE BANK BALANCE OF RS.25,48,456 .33 PS. THE ASSESSEE ALSO GAVE THE REVISED PROFIT AND LOSS ACCOUNT AFTER RECTIFYING CE RTAIN MISTAKES IN THE EARLIER PROFIT AND LOSS ACCOUNT. THE NET EFFECT AFTER CARRYING OUT AL L RECTIFICATION WAS THAT THE INCOME OF THE ASSESSEE STOOD INCREASED BY RS.19,58,731.46 PS. 19. THE AO WAS OF THE VIEW THAT THE ASSESSEE CANNO T ABSOLVE HIMSELF OF THE RESPONSIBILITY AND ACCOUNTABILITY JUST BY ATTRIBUTI NG ERRORS OF EARLIER CHARTERED ACCOUNTANT, THAT THE ERRORS WERE SERIOUS AND DEFINI TELY DELIBERATE AND THE DISCLOSURE OF ADDITION INCOME WAS NOT MADE BY FILING A REVISED RE TURN OF INCOME NOR WAS THE DISCLOSURE VOLUNTARY. THE AO HAS ALSO OBSERVED THA T THERE WAS NO EVIDENCE TO SHOW THAT THE ERSTWHILE FIRM OF CHARTERED ACCOUNTANTS OF THE ASSESSEE IN FACT COMMITTED ERROR. WE ARE OF THE VIEW SUCH LINE OF REASONING ADOPTED BY T HE AO FOR COMING TO THE CONCLUSION THAT THE ASSESSEE WAS GUILTY OF HAVING CONCEALED PA RTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME, IS NOT PROPER. F ROM THE SEQUENCE OF EVENTS NARRATED IN THE EARLIER PARAGRAPHS FROM THE TIME THE ASSESSEE F ILED HIS RETURN OF INCOME TILL THE COMPLETION OF THE ASSESSMENT, IT HAS BEEN THE STAND OF THE ASSESSEE THAT THE EARLIER FIRM OF CHARTERED ACCOUNTANTS WHO FILED THE RETURN OF IN COME OF THE ASSESSEE, HAD COMMITTED ERRORS AND OMISSIONS IN THE MATTER OF PRE PARATION OF THE ASSESSEES PROFIT AND LOSS ACCOUNT AS WELL THE BALANCE SHEET BESIDES ERRO RS AND OMISSIONS IN THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE. THE SEQUENC E OF EVENTS AND THE VARIOUS CIRCUMSTANCES BY ITSELF IS INDICATIVE OF THE FACT A NEW FIRM OF CHARTERED ACCOUNTANTS FOUND SEVERAL ERRORS AND MADE EFFORTS TO PRESENT TH E CORRECT STATE OF AFFAIRS. MOREOVER THESE EXPLANATIONS GIVEN BY THE NEW FIRM OF CHARTER ED ACCOUNTANTS WERE ACCEPTED BY THE AO AND THE AO HAS FOUND NO FAULT IN THEIR EXPLANATI ON WHEN CONCLUDING THE ASSESSMENT. IT IS ONLY IN THE PENALTY PROCEEDINGS THAT THE AO H AS GIVE ALL THE ABOVE REASONS FOR IMPOSING PENALTY ON THE ASSESSEE. IN THE GIVEN FAC TS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE IMPOSITION OF PENALTY ON T HE AFORESAID ADDITION CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE CANCELLED. THE HONBLE SUPREME COURT IN THE 13 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 13 CASE OF PRICE WATERHOUSE COOPERS (P) LTD. VS. CIT ( 2012) 25 TAXMANN.COM 400 (SC) WAS DEALING WITH A CASE OF IMPOSITION OF PENALTY U/ S.271(1)( C) OF THE ACT WHEN THERE ARE BONA-FIDE AND INADVERTENT ERRORS. THE HONBLE SUPR EME COURT HELD THAT IN SUCH CIRCUMSTANCES, NO PENALTY CAN BE IMPOSED. THE LEAR NED DR HOWEVER POINTED OUT THAT IN THE AFORESAID CASE, THE ASSESSEE FILED A REVISED RE TURN OF INCOME BUT THE ASSESSEE IN THE PRESENT CASE DID NOT FILE A REVISED RETURN OF INCOM E. IN OUR VIEW THE AFORESAID DISTINCTION SOUGHT TO BE MADE OUT BY THE LEARNED DR CANNOT BE THE BASIS TO SUSTAIN IMPOSITION OF PENALTY. THE FACT REMAINS THAT THE A DDITION TO THE TOTAL INCOME WAS NOT BECAUSE OF ANY ATTEMPT TO CONCEAL PARTICULARS OF IN COME OR TO FURNISH INACCURATE PARTICULARS OF INCOME BUT BECAUSE OF BONA-FIDE AND INADVERTENT ERROR. 20. AS FAR AS IMPOSITION OF PENALTY ON THE ADDITIO N OF RS.22,103/- TO THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE FACTS NA RRATED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS CLEARLY SHOW THAT THE FACT THAT RENT RECEIVABLE FOR THE MUMBAI PROPERTY FOR THE PREVIOUS YEAR WAS A SUM OF RS.84,892/- WAS DISCERNIBLE FROM THE DETAILS FILED BY THE ASSESSEE HIMSELF IN THE FO RM OF TDS CERTIFICATE ISSUED BY BBC. THEREFORE THERE CANNOT BE ANY COMPLAINT OF CONCEALM ENT OF PARTICULARS OF INCOME. THE BASIS OF THE CLAIM MADE BY THE ASSESSEE WAS THAT IN COME FROM HOUSE PROPERTY HAS TO BE OFFERED TO TAX ON RECEIPT BASIS ONLY AND NOT ON THE BASIS OF ACCRUAL. THE STAND TAKEN BY THE ASSESSEE IN THIS REGARD IS NOT LEGALLY CORRECT IN THE LIGHT OF THE PROVISIONS OF SEC.22 AND 23 OF THE ACT, WHICH WE HAVE DISCUSSED IN THE E ARLIER PART OF THIS ORDER. THIS IS CLAIM MADE BY THE ASSESSEE THOUGH IT IS REJECTED CA NNOT BE THE BASIS TO IMPOSE PENALTY. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RE LIANCE PETROPRODUCTS PVT.LTD. 322 ITR 158 (SC) TAKEN THE VIEW THAT MAKING AN INCORREC T CLAIM WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. WE AR E OF THE VIEW THAT IMPOSITION OF PENALTY ON THIS ADDITION, THEREFORE, CANNOT BE SUST AINED. 14 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 14 21. AS FAR AS THE ADDITION OF RS. 5,57,283.43 PS. BEING UNEXPLAINED UNSECURED LOANS MADE U/S.68 OF THE ACT IS CONCERNED, THE ASSESSEE S UBMITTED THAT IN RESPECT OF ADDITION MADE U/S.68 OF THE ACT EXPLANATION 1 TO SEC.271(1) ( C ) OF THE ACT WOULD NOT BE APPLICABLE AND NO PENALTY COULD BE IMPOSED IN RESPE CT OF SUCH ADDITION. IN THIS REGARD THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT 249 ITR 125 (GUJ. ). THE LEARNED AO HAS HOWEVER DISTINGUISHED THE AFORESAID DECISION BY POINTING OU T THAT IN THE CITED DECISION THE ASSESSEE OFFERED AN EXPLANATION WHICH WAS NEITHER P ROVED NOR DISPROVED AND THEREFORE IT WAS CASE WHERE FACTS STOOD NOT PROVED. IN SUCH A SITUATION ALONE PENALTY COULD BE IMPOSED. ACCORDING TO THE AO, THE ASSESSEE IN THE PRESENT CASE OFFERED NO EXPLANATION WHATSOEVER AND HENCE, THE IMPOSITION OF PENALTY ON THIS ADDITION WAS JUSTIFIED. THE LEARNED COUNSEL FOR THE ASSESSEE HAS STATED BEFORE US THAT THESE WERE RECEIPTS TOWARDS PROFESSION EXPENSES SHOWN AS OUTSTANDING LIABILITIE S. THE ASSESSEE WAS UNABLE TO COMPILE THE NECESSARY DETAILS. ACCORDING TO HIM, T HIS EXPLANATION IN THE LIGHT OF THE FACT THAT SUCH RECEIPTS ARE NORMAL IN THE PROFESSION TO WHICH THE ASSESSEE BELONGS, WAS SUFFICIENT TO APPLY THE RATIO OF THE DECISION IN TH E CASE OF NATIONAL TEXTILES (SUPRA). WE ARE OF THE VIEW THAT THE ARGUMENT PUT FORTH BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE ACCEPTABLE AND THEREFORE WE HOLD THAT IMPOSITION OF PENALTY ON THIS ADDITION, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WAS NOT WARRANTED. 22. AS FAR AS THE ADDITION OF RS.89,33,450 ON ACCO UNT OF DISALLOWANCE OF EXPENDITURE WHICH WERE NOT ACTUALLY PAID BY THE ASSESSEE IS CON CERNED, IT IS CLEAR FROM THE FACTS OF THE CASE THAT A SUM OF RS.89,33,450 OUT OF THE EXPE NDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT REPRESENTED PROFESSIONAL FEES PAYABLE TO BA RRISTERS, AUDIT FEE PAYABLE, OUTSTANDING SALARIES AND WAGES AT THE END OF THE FI NANCIAL YEAR AND OTHER LIABILITIES FOR VARIOUS EXPENSES. THESE WERE LIABILITIES FOR WHICH THE ASSESSEE HAD MADE PROVISION IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS FOLL OWING CASH SYSTEM OF ACCOUNTING. UNDER THE CASH SYSTEM OF ACCOUNTING, INCOME ACTUALL Y RECEIVED HAS TO BE DECLARED AS 15 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 15 INCOME AND EXPENSES ACTUALLY INCURRED COULD BE CLAI MED AS DEDUCTION. EXPENSES ACTUALLY NOT PAID COULD NOT BE CLAIMED AS DEDUCTION . THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE ASSESSEE ENSURED DEDUCTION OF TAXES UPO N RECEIPT OF THE RELEVANT BILLS FOR EXPENSES AND DEPOSITED THE SAME WITH GOVERNMENT ACC OUNTS IRRESPECTIVE OF WHETHER PAYMENTS AGAINST THE BILLS WERE MADE OR NOT. SINCE THE TAX DEDUCTED AT SOURCE ON THE AFORESAID EXPENDITURE WHICH WAS NOT PAID WAS DEPOSI TED INTO THE GOVERNMENT ACCOUNT, THE ASSESSEE CLAIMED THAT IT COULD CLAIM THE EXPEND ITURE IN QUESTION AS DEDUCTION EVEN UNDER THE CASH SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THIS EXPLANATION OF THE ASSESSEE WAS REJECTED BY THE AO NOT ON THE BASIS TH AT THE EXPENDITURE IN QUESTION WAS NOT GENUINE BUT FOR THE REASON THAT UNDER THE SYSTE M OF ACCOUNTING THE DEDUCTION COULD NOT BE ALLOWED. THE REASONS ASSIGNED BY THE ASSESS EE FOR CLAIMING THIS EXPENDITURE ON THE BASIS OF DEDUCTION OF TAX AT SOURCES, WAS ALSO NOT DISBELIEVED BY THE AO. IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT THE RATION LA ID BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA) WILL SU PPORT THE PLEA OF THE ASSESSEE. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE PENALTY O UGHT NOT TO HAVE BEEN IMPOSED EVEN IN RESPECT OF THIS ADDITION. 23. THE NEXT ARGUMENT ON BEHALF OF THE ASSESSEE W AS THAT THE SHOW CAUSE NOTICE U/S.274 OF THE ACT WHICH IS IN A PRINTED FORM DOES NOT STRIKE OUT AS TO WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON THE FOR FURNISHI NG INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF SUCH INCOME. ON THIS A SPECT WE FIND THAT IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. IT IS THEREFORE NOT SPELT OUT AS TO WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PA RTICULARS OF SUCH INCOME. 24. THE HONBLE KARNATAKA HIGH COURT IN THE CASE O F CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HA S HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR 16 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 16 CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT C ERTAIN PRINTED FORM WHERE ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SA TISFY THE REQUIREMENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PROCEED INGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. WE ARE OF TH E VIEW THAT THE AFORESAID DECISION WILL SQUARELY APPLY TO THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE AND THE ORDER IMPOSING PENALTY HAS TO BE HELD AS BAD IN LAW AND LIABLE TO BE CANCELLED ON THIS GROUND AS WELL. 25. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE PENALTY IMPOSED U/S.271(1)( C) OF THE ACT BE CANCELLED. THE APPEAL OF THE ASSESSEE IS AL LOWED. 26. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE COURT ON 11.05.2016 . SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11.05.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI GAUTAM KUMAR MITRA, 100, MAHENDRA ROAD, KOLK ATA-700025. 2. D.C.I.T. CIRCLE-54, KOLKATA. 3. CIT(A)-XXXVI, KOLKATA 4. CIT-XIX, KOLKA TA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 17 ITA NO.07/KOL/2012 SRI GAUTAM KUMAR MITRA A.YR.2006-07 17