D.G. PATIL & CO., MUMBAI V. ITO 13(2)(3), MUMBAI

ITA 7360/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1980 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 31-12-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Source of fund; Difference of opinion; Revised return
• Section: 271(1)(c); 133(6); 251; 208; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D BEFORE SHRI N.V. VASUDEVAN (JM) & B. RAMAKOTAIAH (A M) I.T.A.NO. 7360/MUM/2008 (ASSESSMENT YEAR : 2005-06 ) M/S. D.G. PATIL & CO. 409, SURAT SADAN 4 TH FLOOR SURAT STREET MUMBAI-400 009. VS. ITO 13(2)(3) MUMBAI. APPELLANT RESPONDENT PAN/GIR NO. : AAAFD2769B ASSESSEE BY : SHRI K. SHIVRAM & SHRI PARAS SAVLA DEPARTMENT BY : SHRI S.K. SINGH ORDER PER N.V. VASUDEVAN, JM :- THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 31.10.2008 OF LEARNED CIT(A)-XIII, MUMBAI RELATING TO A.Y. 2005-06. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER OF LEARNED CIT(A) WHEREBY THE LEARNED CIT(A) CONFIRMED THE ORD ER OF THE ASSESSING OFFICER IMPOSING PENALTY ON THE ASSESSEE. 3. FACTS AND CIRCUMSTANCES UNDER WHICH, PENALTY WAS IMPOSED ON THE ASSESSEE BY THE ASSESSING OFFICER ARE AS FOLLOW S :- THE ASSESSEE IS A FIRM ENGAGED IN CLEARING AND FOR WARDING BUSINESS. DURING THE YEAR, THE ASSESSEE DECLARED AG ENCY COMMISSION CHARGES OF RS. 70.01 LAKHS AND DECLARED NET PROFIT OF RS. 87,134/-. FURTHER, THE ASSESSEE FIRM HAS ALSO DECLARED INCOME FROM HOUSE PROPERTY AMOUNTING TO RS. 37,800/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED BANK DETAILS, A GENCY COMMISSION RECEIVED, MONTH-WISE EXPENSES AND VARIOUS OTHER DET AILS. ON VERIFICATION M/S. D.G. PATIL & CO. 2 OF THE PARTNERS CAPITAL ACCOUNT, THE ASSESSING OFF ICER NOTICED THAT THE PARTNERS HAVE INTRODUCED CAPITAL AS UNDER :- NAME OF THE PARTNER CASH INTRODUCTION AS PER PARTNERS CAPITAL ACCOUNT PRADEEP MARATHE RS. 955000 TABAJI RAVAJI PAWAR RS. 955000 DATTARAY ANAND VALE RS. 955000 KASHINATH CHANDRAHANS PATIL RS. 955000 SAVLERAM THAKAJI GAIKWAD RS. 955000 TOTAL RS. 47,75,000/- THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO F URNISH DETAILS OF CAPITAL INTRODUCTION BY PARTNERS AND THEIR SOURCES OF INCOME. IN RESPONSE TO THE SAME, THE AR SUBMITTED THAT THE SOURCES HAVE BEEN EXPLAINED IN THE PERSONAL RETURN OF INCOME FILED BY THE PARTNERS . 4. THE ASSESSING OFFICER ISSUED SUMMONS U/S. 131 OF THE ACT AND EXAMINED ALL THE FIVE PARTNERS. ALL OF THEM ADMITTE D THAT THEY HAVE INTRODUCED CAPITAL OF RS. 9,55,000/- EACH AS CAPITA L IN THE ASSESSEE FIRM. ALL OF THEM EXPLAINED THE SOURCES OF FUNDS WHICH WE RE INTRODUCED AS GIFTS/LOANS FROM RELATIVES OR AGRICULTURAL INCOME. THEY DID NOT GIVE THE NAME OF THE DONORS, THE OCCASION FOR MAKING THE GIF T. THE DETAILS OF THE PERSONS WHO GAVE THE LOANS TO THEM WERE ALSO NOT GI VEN. IN RESPECT OF AGRICULTURAL INCOME ALSO NO DETAILS WERE GIVEN. THE ASSESSING OFFICER MADE A SUGGESTION IN THE COURSE OF EXAMINATION OF E ACH OF THE PARTNERS THAT IT IS THE FIRMS UNACCOUNTED MONEY WHICH HAD B EEN INTRODUCED IN THE GARB OF CAPITAL CONTRIBUTION BY THE PARTNERS. T O SUCH A SUGGESTION ALL THE PARTNERS GAVE A UNIFORM REPLY I HAVE NO EXPLAN ATION. THE ASSESSING OFFICER IN THE CIRCUMSTANCES WAS OF THE VIEW THAT P RIMA FACIE THE CLAIM OF THE ASSESSEE REGARDING INTRODUCTION OF CAPITAL BY T HE PARTNERS WAS NOT ESTABLISHED. 5. THE ASSESSING OFFICER THEREAFTER PROCEEDED TO EXAMINE AS TO HOW THE CAPITAL INTRODUCED BY THE PARTNERS WAS IN FACT UNACCOUNTED RECEIPTS M/S. D.G. PATIL & CO. 3 GENERATED FROM BUSINESS WHICH WAS SOUGHT TO BE INTR ODUCED IN THE GARB OF CAPITAL CONTRIBUTION BY THE PARTNERS. DURING THE YEAR, THE ASSESSEE HAD DECLARED AGENCY COMMISSION OF RS. 70.01 LAKHS. THE ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) OF THE I.T. ACT TO VARIOU S PARTIES FROM WHOM AGENCY COMMISSION WAS RECEIVED. ON VERIFICATION OF THE REPLIES RECEIVED FROM THE VARIOUS PARTIES, THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE HAS RECEIVED MORE THAN THE AMOUNT WHAT HAS BEEN CRE DITED TO THE P&L ACCOUNT I.E. GROSS AGENCY CHARGES. THE ASSESSING OF FICER CALLED UPON THE ASSESSEE TO FURNISH SUPPORTING I.E. BILLS, VOUCHERS , BOOKS OF ACCOUNTS ETC. FOR VERIFICATION OF VARIOUS EXPENSES CLAIMED BY THE FIRM AS WELL AS THE BASIS OF DECLARING NET INCOME ON ACCOUNT OF AGENCY COMMISSION INCOME. IN RESPONSE TO THE SAME, THE ASSESSEE FURNISHED LED GER STATEMENT OF VARIOUS PARTIES BUT COULD NOT FURNISH THE SUPPORTIN G. THE ASSESSEE SUBMITTED THAT ONLY NET AGENCY COMMISSION WAS CREDI TED TO P&L ACCOUNT. THE ASSESSEE SUBMITTED THAT IT WAS A CLEARING AND F ORWARDING AGENCY AND THEY HAD CHARGED AGENCY COMMISSION FROM CUSTOMERS A S PER NEGOTIATION BETWEEN THEM. THE ASSESSEE INCURS EXPENSES ON BEHAL F OF THE CUSTOMER WHICH ARE REIMBURSED BY THE ASSESSEES CUSTOMERS. T HAT PART OF THE RECEIPTS FROM THE CUSTOMERS WHICH ARE REIMBURSEMENT OF EXPENSES IS DEDUCTED FROM THE GROSS COMMISSION RECEIVED FROM TH E CUSTOMERS AND ONLY NET COMMISSION IS SHOWN IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER WAS OF VIEW THAT THE ASSESSEE MAK ES A BILL BASED ON HIS CLAIM OF EXPENSES ON THEIR PRINCIPALS. IF THE EXPEN SES INCURRED ON BEHALF OF THEIR PRINCIPAL ARE NOT VERIFIABLE, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. ANY INFLATED BILL TO THEIR PRINCIPAL WILL RESULT IN AN INCOME TO THE ASSESSEE WHETHER THE EXPENSES ARE DEBITED OR NO T. THE ASSESSING OFFICER ALSO FOUND THAT THERE WAS NO WRITTEN AGREEM ENT BETWEEN THE ASSESSEE AND THEIR PRINCIPALS TO VERIFY THE CHARGES COLLECTED FOR EACH JOB WORK CARRIED OUT BY THE ASSESSEE. THE ASSESSING OFF ICER HELD THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE REIMBURSABLE EXPENSES COLLECTED BY IT HAVE BEEN FULLY EXPENDED. HE ALSO HELD THAT THE PROVISIONS OF INCOME TAX DO NOT RESTRICT THE ASSESSING OFFICER TO BRING TO TAX THE UNEXPENDED REIMBURSABLE EXPENSES. THE ASSESSING OFFICER FURTHE R CONCLUDED THAT THE M/S. D.G. PATIL & CO. 4 FACT OF CASH GENERATION BY FIRM WAS PROVED BECAUSE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE ACTUAL REIMBURSABLE EXPENSES RECEIVED AS WELL AS EXPENSES SPENT ON BEHALF OF THEIR PRINCIPALS WITH S UPPORTING EVIDENCES. THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO P RODUCE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS, TO VERIFY THE EXPENSE S REIMBURSED AS WELL AS EXPENDED ON BEHALF OF THE ASSESSEE. HOWEVER, THE ASSESSEE EXPRESSED INABILITY TO FURNISH COMPLETE DETAILS. THE ASSESSIN G OFFICER THEREFORE CONCLUDED THAT THE PARTNERS HAVE INTRODUCED CAPITA L BY DIFFERENT NAMES TO SHOW THAT THE FUNDS HAVE BEEN RECEIVED FROM DIFF ERENT ANGLES. HOWEVER, IT IS IN ANOTHER WAY. THE MAIN ROUTE OF FU NDS GENERATION IS AT THE STAGE OF FIRM ITSELF. ONE CANNOT SHUT ONES EYE S. ACCORDING TO THE AO, THE NEXUS IS FURTHER PROVED BY THE DOCUMENTARY EVID ENCE OF RATIO OF DISTRIBUTION OF PROFITS TOO. FROM THE AUDIT REPORT, PART-B, THE ASSESSING OFFICER NOTICED THAT THE PARTNERS SHARING RATIOS W AS AS UNDER :- NAME OF THE PARTNER RATIO OF SHARE PRADEEP MARATHE 20% TABAJI RAVAJI PAWAR 20% DATTARAY ANAND VALE 20% KASHINATH CHANDRAHANS PATIL 20% SAVLERAM THAKAJI GAIKWAD 20% TOTAL 100% ACCORDING TO THE ASSESSING OFFICER, THIS GOES TO PR OVE THAT THE ASSESSEE FIRM HAD DISTRIBUTED THE UNACCOUNTED FUNDS GENERATE D BY THE FIRM IN EQUAL PROPORTIONS AMONGST ALL THE PARTNERS OF THE F IRM IN THEIR PROFIT SHARING RATIOS. THEREAFTER, THE PARTNERS AT THEIR I NDIVIDUAL CAPACITY HAVE ROUTED THESE FUNDS THROUGH PARTNERS CAPITAL ACCOUN TS. THE ASSESSING OFFICER THEREAFTER CONCLUDED AS FOLLOWS :- FROM THE ABOVE, IT CAN BE UNDERSTOOD THAT THE FIRM IS GENERATING UNACCOUNTED FUNDS WHICH WERE NOT OFFERED TO TAX AND THE SAME WERE ROUTED THROUGH PARTNERS CAPITAL ACCOUNT TO AV OID THE INCIDENCE OF TAX LIABILITY. DURING THE COURSE OF RE CORDING STATEMENT, THE PARTNERS HAVE STATED THAT THEY HAVE INTRODUCED THE CAPITAL AS WELL AS WITHDRAWN THE CAPITAL. IT WAS AG AIN STATED THAT THE WITHDRAWN CAPITAL WAS RE-INTRODUCED IN THE FIRM . THEREFORE THE M/S. D.G. PATIL & CO. 5 NET INTRODUCTION OF CAPITAL BY EACH PARTNER IS WORK ED OUT AS UNDER:- NAME OF THE PARTNER CASH INTRODUCED CASH WITHDRAWN NET INTRODUCTION PRADEEP MARATHE RS. 955000 RS. 280,000 RS. 675,000 TABAJI RAVAJI PAWAR RS. 955000 RS. 280,000 RS. 675, 000 DATTARAY ANAND VALE RS. 955000 RS. 280,000 RS. 675, 000 KASHINATH CHANDRAHANS PATIL RS. 955000 RS. 280,000 RS. 675,000 SAVLERAM THAKAJI GAIKWAD RS. 955000 RS. 280,000 RS. 675,000 TOTAL RS. 47,75,000/- RS. 14,00,000 RS. 3375,000 IN VIEW OF THE ABOVE CIRCUMSTANCES AND AS THE GIFTS /LOAN AND AGRICULTURAL INCOME RECEIVED BY THE PARTNERS WAS N OT PROVED, THE NEXUS WHICH THE ASSESSEE FIRM AND REPRESENTATIVE CL AIMED THROUGH THE ASSESSMENT PROCEEDINGS IS FOUND FALSE AND THERE FORE, THE NET INTRODUCTION OF CAPITAL BY PARTNERS AMOUNTING TO RS . 33,75,000/- IS TREATED AS UNEXPLAINED CASH CREDIT U/S. 68 OF TH E I.T. ACT IN THE BOOKS OF THE FIRM AND TREATED AS UNDISCLOSED INCOME OF THE FIRM. FROM THE ABOVE, I AM FULLY SATISFIED THAT THE ASSES SEE FIRM HAD CONCEALED THE PARTICULARS OF INCOME AND THEREFORE P ENALTY PROCEEDINGS U/S. 271(1)(C) READ WITH EXPLANATION 1 OF THE I.T. ACT ARE HEREBY INITIATED. 6. THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 28.12.2007. IN SUCH REVISED RETURN OF INCOME, THE ASSESSEE OFFERED TO TAX THE CAPITAL INTRODUCED BY THE PARTNERS AS CAPITAL (AFTER WITHDR AWAL OF CAPITAL BY THEM) TO TAX. THE ASSESSING OFFICER DID NOT MAKE TH E ADDITION BASED ON THE REVISED RETURN OF INCOME BUT ON THE BASIS OF TH E FACTS AND CIRCUMSTANCES AS BROUGHT OUT BY HIM IN THE ORDER OF ASSESSMENT. ACCORDING TO THE ASSESSING OFFICER, FILING OF THE R EVISED RETURN OF INCOME IS AN ADMISSION BY THE ASSESSEE THAT IT WAS GENERAT ING UNACCOUNTED CASH AND NOT OFFERING THE SAME TO TAX. 7. IT IS IN RESPECT OF THE AFORESAID ADDITION MADE IN COURSE OF ASSESSMENT THAT THE ASSESSING OFFICER IMPOSED PENALTY ON THE A SSESSEE REJECTING THE PLEA OF THE ASSESSEE THAT THERE WAS NO INACCURATE F URNISHING OF PARTICULARS OF INCOME. LEARNED CIT(A) CONFIRMED THE ORDER OF THE M/S. D.G. PATIL & CO. 6 ASSESSING OFFICER GIVING RISE TO THE PRESENT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT UNDER THE INCOME TAX ACT FI RM AND PARTNERS ARE CONSIDERED DISTINCT AND SEPARATE. ACCORDING TO HIM, THE PARTNERS APPEARED BEFORE THE ASSESSING OFFICER AND CONFIRMED THAT THEY CONTRIBUTED CAPITAL TO THE FIRM. THE PARTNERS ALSO FILED COPIES OF THEIR INCOME TAX RETURNS, BALANCE SHEET ETC. THUS, AS FAR AS THE FIRM IS CONCERNED, THE BURDEN THAT LAY ON IT TO EXPLAIN THE SOURCE OF CAPITAL SHOWN AS RECEIVED BY IT IS DISCHARGED. ANY INVESTIG ATION REGARDING SOURCE OF FUNDS OF THE PARTNERS CANNOT BE MADE IN THE CASE OF THE FIRM BUT CAN BE MADE ONLY IN THE CASE OF ASSESSMENT OF THE INDIV IDUAL PARTNERS. IF THE ASSESSING OFFICER IS ALLOWED TO INVESTIGATE THE SOU RCE OF THE PARTNERS IN THE ASSESSMENT OF THE FIRM, THAT WOULD BE EXAMINING SOURCE OF SOURCE WHICH IS NOT PERMISSIBLE. IN SUPPORT OF THE PROPOSI TION THAT INTRODUCTION OF CAPITAL BY PARTNERS IN A FIRM WHEN CONFIRMED BY THE PARTNERS, CANNOT BE CONSIDERED AS UNEXPLAINED AND ADDED IN THE CASE OF THE FIRM. LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DE CISIONS :- CIT VS. JAISWAL MOTOR FINANCE, 141 ITR 706 (ALL) CIT VS. BURMA ELECTRO CORPORATION, 252 ITR 344 (P&H ) BHORAJIA CONSTRUCTION CO. VS. ITO, 42 ITD 450 (AHD) DCIT VS. ROHINI BUILDERS, 256 ITR 360 (GUJ) CIT VS. RAMESHWAR DASS SURESH PAL CHHEKA, 208 CTR 4 59 (P&H) IT WAS CONTENDED THAT PENALTY PROCEEDINGS AND ASSES SMENT PROCEEDINGS ARE SEPARATE PROCEEDINGS. THE FINDINGS IN THE ASSES SMENT PROCEEDINGS ARE RELEVANT BUT NOT CONCLUSIVE. IT WAS ALSO SUBMITTED THAT LEVY OF PENALTY IS NOT AUTOMATIC. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED CO UNSEL FOR THE ASSESSEE. IN THE CASE OF CIT VS. RAMESHWAR DASS SUR ESH PAL CHEEKA (SUPRA), IT HAS BEEN HELD BY THE HON'BLE P&H HIGH C OURT THAT ONCE A PARTNER OF THE FIRM ACCEPTS HAVING ADVANCED MONEY T O THE FIRM NO ADDITION CAN BE MADE IN THE HANDS OF THE FIRM U/S. 68 OF THE ACT. THE M/S. D.G. PATIL & CO. 7 HON'BLE COURT IN HOLDING AS ABOVE REFERRED TO THE D ECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. JAISWAL MOTOR FINANCE (SUPRA) AND HON'BLE BOMBAY HIGH COURT IN THE CASE O F NARAYANDAS KEDARNATH VS. CIT, 22 ITR 18 (BOM). IN THESE TWO DE CISIONS, HON'BLE HIGH COURTS HAD ALSO EMPHASIZED THE FACT THAT THERE WERE NO MATERIALS TO INDICATE THAT THE CAPITAL INTRODUCED WAS THE PROFIT OF THE FIRM. IN FACT HON'BLE BOMBAY HIGH COURT HAD ALSO OBSERVED THAT TH EY DO NOT LAY DOWN ANY GENERAL LAW WHICH SHOULD APPLY TO ALL CASES AND EACH CASE WOULD HAVE TO BE DECIDED ON THE BASIS OF THE FACTS AS FOU ND. 10. IN THE PRESENT CASE, WE HAVE ALREADY SEEN THAT THE ASSESSING OFFICER HAS BROUGHT MATERIAL ON RECORD WHICH SHOWS THAT THE ASSESSEE HAS BEEN EARNING COMMISSION INCOME WHICH IS NOT BEI NG PROPERLY ACCOUNTED AS INCOME IN THE BOOKS OF ACCOUNTS. IT IS ALSO FURTHER SEEN THAT THE PARTNERS COULD NOT DENY THE SUGGESTION OF THE A SSESSING OFFICER THAT THE CAPITAL INTRODUCED BY THEM WERE IN FACT UNACCOU NTED INCOME OF THE FIRM. THEY PLEADED TOTAL IGNORANCE ABOUT THE SOURCE OF FUNDS WHICH THEY INTRODUCED AS CAPITAL OF THE FIRM. ALL THE PARTNERS CONTRIBUTED IDENTICAL SUM ON SAME DATES. THE ASSESSEE FINALLY FILED A REV ISED RETURN OF INCOME OFFERING TO TAX, THE CAPITAL INTRODUCED BY THE PART NERS AS CAPITAL, AS INCOME. IT IS THEREFORE A FUTILE ATTEMPT BY THE ASS ESSEE TO NOW CONTEND THAT THE VERY ASSESSMENT OF INCOME WHICH IS THE BAS IS OF IMPOSITION OF PENALTY IS INCORRECT. IN THE GIVEN CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CONTENTION PUT FORTH ON BEHALF OF THE ASSESSEE BEFORE US THAT THE VERY ASSESSMENT MADE BY THE ASSESSING OFFI CER IS ERRONEOUS AND THEREFORE NO PENALTY SHOULD BE IMPOSED, CANNOT BE A CCEPTED. 11. THE NEXT CONTENTION OF THE ASSESSEE WAS THAT TH E ASSESSEE ACCEPTED THE ASSESSMENT ON THE PROMISE THAT THE ASS ESSING OFFICER WOULD NOT IMPOSE PENALTY. IT WAS ALSO CONTENDED THAT THE ASSESSEE FILED A REVISED RETURN OF INCOME AND THEREFORE NO PENALTY C AN BE IMPOSED. IN THIS REGARD REFERENCE WAS MADE TO THE DECISION OF HON'BL E SUPREME COURT IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL, 251 ITR 9 (SC) . CIT VS. KIRAN M/S. D.G. PATIL & CO. 8 & CO., 217 ITR 326 (BOM) AND SIR SHADILAL SUGAR AND GENERAL MILLS LTD. VS. CIT, 168 ITR 705 (SC). WE ARE OF THE VIEW THAT THE ACT OF FILING A REVISED RETURN OF INCOME WILL NOT SAVE THE ASSESSEE BECAUSE THE ASSESSING OFFICER DID NOT ACCEPT THE REVISED RETURN OF INCOME BUT MADE THE ADDITION ON THE BASIS OF FINDINGS ARRIVED AT BY HIM IN THE A SSESSMENT PROCEEDINGS. AS FAR AS THE CONTENTION OF THE ASSESSEE THAT THE S UM WAS OFFERED TO TAX TO BUY PEACE AND ON THE CONDITION THAT NO PENALTY W ILL BE IMPOSED, WE ARE OF THE VIEW THAT THE SAME IS NOT ACCEPTABLE. HO N'BLE SUPREME COURT IN THE CASE OF K.P. MADHUSUDAN, 251 ITR 99 (SUPREME COURT) HAS HELD THAT THERE CANNOT BE ESTOPPEL AGAINST A STATUTE AND THAT THE ASSESSING OFFICER CANNOT HOLD OUT A PROMISE NOT TO IMPOSE PEN ALTY AS THERE IS NO SUCH POWER GIVEN TO THE ASSESSING OFFICER UNDER THE ACT. IT WAS FURTHER HELD THAT EXPLANATION 1 TO SECTION 271(1)(C) CASTS THE BURDEN ON THE ASSESSEE TO SHOW AS TO WHY PENALTY SHOULD NOT BE IM POSED IN A GIVEN CASE. THE DECISION IN THE CASE OF S.C. MITTAL (SUPR A); KIRAN & CO. (BOMBAY HIGH COURT) ARE NOT RELEVANT TO BECAUSE THE ASSESSING OFFICER IN THE PRESENT CASE DID NOT ACT OR ACCEPT THE REVISED RETURN OF INCOME. 12. IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASS ESSEE THAT THE ASSESSEE HAS FURNISHED AN EXPLANATION IN THE PENALT Y PROCEEDINGS WHICH IS NOT FOUND FALSE AND THEREFORE NO PENALTY SHOULD BE LEVIED. UNDER EXPLANATION 1 TO SECTION 271(1) OF THE ACT, THE ASS ESSEE HAS TO OFFER AN EXPLANATION WHICH IS BONAFIDE AND SHOULD FURTHER DI SCLOSE ALL FACTS MATERIAL TO COMPUTATION OF INCOME BEFORE IT CAN BE SAID THAT HE HAS DISCHARGED HIS BURDEN. ON THE FACTS AS FOUND BY THE ASSESSING OFFICER IT CANNOT BE SAID THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS BONAFIDE. IN THE PENALTY PROCEEDINGS ALSO THE ASSESSEE HAS BE EN QUESTIONING THE CORRECTNESS OF THE ASSESSMENT. THE ASSESSEE HAS ALS O TAKEN A STAND THAT IT WAS A CASE OF DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER. WE ARE OF THE VIEW THAT THE EXPL ANATION OFFERED BY THE ASSESSEE IS NOT BONAFIDE. THE ASSESSEE HAS NOT BROU GHT ANY MATERIAL EVEN IN THE PENALTY PROCEEDINGS AS TO HOW ITS EXPLANATI ON WAS BONAFIDE. AS WE HAVE ALREADY SEEN THE ASSESSEES CONDUCT IN FILING A REVISED RETURN OF M/S. D.G. PATIL & CO. 9 INCOME AND ACCEPTING THE FACT THAT THE CAPITAL INTR ODUCED BY THE PARTNERS WERE IN FACT UNACCOUNTED INCOME OF THE FIRM. WE HAV E ALSO SEEN THE STATEMENT OF THE PARTNERS AND THEIR INABILITY TO GI VE ANY SATISFACTORY EXPLANATION OR EVIDENCE. THE ASSESSEE HAS MADE NO A TTEMPTS IN THE PENALTY PROCEEDINGS TO EXPLAIN AS TO HOW THE CAPITA L CONTRIBUTION BY THE PARTNERS IS NOT THE FIRMS UNACCOUNTED INCOME. THE ASSESSEE IS THUS GUILTY OF HAVING FURNISHED INACCURATE PARTICULARS O F INCOME. 13. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED REL IANCE ON A DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF MOHD.HAJI A DAM & CO. VS. DCIT, ITA NO. 4341/MUM/09 WHEREIN ON IDENTICAL ISS UE THE TRIBUNAL HAD CANCELLED PENALTY IMPOSED. WE HAVE PERUSED THE AFORESAID DECISION AND FIND THAT IN THE AFORESAID CASE THE TRIBUNAL FO UND THAT THE BASIS ON WHICH THE ADDITION WAS MADE BY THE ASSESSING OFFICE R WAS ITSELF DOUBTFUL. THE TRIBUNAL FOUND THAT THERE WAS NO EVIDENCE ON MA TERIAL TO SHOW THAT THE CAPITAL CONTRIBUTION BY THE PARTNERS WAS UNACCO UNTED INCOME OF THE FIRM. IN THE PRESENT CASE, WE FIND THAT THE ASSESSI NG OFFICER HAS ESTABLISHED LINK BETWEEN UNACCOUNTED CASH OF THE FI RM AND CAPITAL INTRODUCED BY THE PARTNER. THE ASSESSEE HAS NOT REB UTTED THE FINDINGS OF THE ASSESSING OFFICER. THE FACTS WERE WITHIN THE EX CLUSIVE KNOWLEDGE OF THE ASSESSEE AND THE ASSESSEE FAILED TO SHOW AS TO HOW THE CONCLUSIONS DRAWN BY THE ASSESSING OFFICER WERE NOT CORRECT. TH E AFORESAID DECISION OF THE TRIBUNAL RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS THEREFORE NOT APPLICABLE TO THE FACTS OF THE PRESEN T CASE. 14. THE FACTS IN THE PRESENT CASE ARE THAT THE PART NERS OF THE ASSESSEE EXPLAINED THEIR CAPITAL CONTRIBUTION TO THE FIRM AS OUT OF THE GIFTS/LOAN OR AGRICULTURAL INCOME. THEY GAVE NO FURTHER DETAILS. IN THEIR RETURN OF INCOME, THE PARTNERS GAVE DETAILS OF THE DONORS, CR EDITORS AND AGRICULTURAL INCOME BUT IN THE PROCEEDINGS IN RELAT ION TO THE ASSESSEE NO DETAILS WERE GIVEN. THE ASSESSING OFFICER THEN BROU GHT OUT NEXUS BETWEEN THE UNACCOUNTED INCOME OF THE FIRM AND THE CAPITAL CONTRIBUTION BY THE PARTNERS BEING FROM AND OUT OF SUCH UNACCOUNTED INC OME. THE ASSESSEE M/S. D.G. PATIL & CO. 10 COULD NOT REBUT THE CONCLUSIONS DRAWN BY THE ASSESS ING OFFICER. THE ASSESSEE FILED REVISED RETURN OF INCOME OFFERING TO TAX THE CAPITAL CONTRIBUTION BY THE PARTNERS. THE ABOVE STATE OF AF FAIRS REMAINS THE SAME EVEN IN PENALTY PROCEEDINGS. WE ARE OF THE VIEW THA T ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE WAS FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THEREFORE THERE WAS JUSTIFICATION FOR IMPOSING PENALTY. WE THEREFORE CONFIRM THE ORDER OF LEARNED CIT(A) AND D ISMISS THE APPEAL BY THE ASSESSEE. 15. IN THE RESULT, APPEAL BY THE ASSESSEE IS DISMIS SED. ORDER HAS BEEN PRONOUNCED ON 21 ST DAY OF MAY, 2010. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 21 ST MAY, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS