Maruti Organics Limited, Hyderabad V. ACIT, Hyderabad

ITA 91/HYD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1372 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2003-2004
• Appeal Filed On: 22-01-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: E S NAGENDRA PRASAD
• Assessee Lawyers: K VASANT KUMAR
• Keywords: Unexplained cash credit; Retrospective amendment; Capital receipt; Onus to prove
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.91/HYD/07 : ASSTT. YEAR 2003-20 04 MARUTI ORGANICS LTD.VS. ACIT, CIRCLE 16 (2), HYDERABAD HYDERABAD APPELLANT BY : SHR I K.VASANT KUMAR,ADVOCATE RESPONDENT BY : SHRI E.S. NAGENDRA P RASAD O R D E R PER SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST ORDER P ASSED BY THE LEARNED CIT(A) V, HYDERABAD DATED 29-11-2006 FOR THE ASSESSMENT YEAR 2003-04. THE ASSESSEE RAISED THE GROUND REL ATING TO CONFIRMATION OF THE PENALTY LEVIED U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961( THE ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF INDUSTRIAL ALCOHOL, HAS FILED ITS RETURN OF INCOME FOR THE AY 2003-04 DECLARING INCOME AT A LOSS OF RS.42,78,704. THE RETURN WAS SUBJECT TO SCRUTINY U/S 143(3) OF THE INCO ME TAX ACT, 1961 (THE ACT), WHEREIN IT WAS FOUND THAT THE ASSESSEE IN TRODUCED UNSECURED LOAN OF RS.44,45,000. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH CONFIRMATION LETTER FROM THE CREDITORS IN SUPPORT OF THE ABOVE UNSECURED LOAN. IN SPITE OF GIVING AMPLE OP PORTUNITY TO FILE CONFIRMATION LETTER, THE ASSESSEE FAILED TO FURNISH THE SAME. THEREFORE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY ADDING 2 THE ENTIRE AMOUNT OF RS.44,45,000 ON ACCOUNT OF UNEXPL AINED CREDIT BY INVOKING THE PROVISIONS OF SEC. 68 OF THE ACT AND THUS H E HAS DETERMINED THE INCOME OF THE ASSESSEE AT RS.1,66,286 AND AFTER ALLOWING SET OFF OF THE SAME AGAINST THE CARRIED FORWA RD BUSINESS LOSS OF ASSESSMENT YEAR 1996-97, HE DETERMINED THE TOTAL INC OME AT NIL. FURTHER, ON ACCOUNT OF CONCEALMENT OF THE INCOME, THE ASSE SSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271 (1) OF THE ACT AND LEVIED PENALTY AT RS.16,33,538 ON THE REASON THAT THE ASSESSEE HAS CONCEALED ITS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF UNEXPLAINED CASH CREDIT TO THE TUNE OF RS.44, 45,000 IN THE RETURN FILED. AGAINST THE CONFIRMATION OF THE PENAL TY BY THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE NEITHER CARRI ED OUT ANY MANUFACTURING ACTIVITY NOR ANY OTHER BUSINESS ACTIVI TY AND ITS INCOME IS ONLY FROM OTHER SOURCES AS SEEN FROM THE PROFIT AND LOSS ACCOUNT FURNISHED IN THE PAPER BOOK. HE SUBMITTED THAT THE ASSESSEE HAS NO SOURCE OF INCOME IN THE YEAR UNDER APPEAL. HE SU BMITTED THAT THE FAILURE OF THE ASSESSEE TO PROVE THE CREDIT AS GENUIN E CANNOT BE INFERRED THAT ASSESSEE HAS CONCEALED THE INCOME. FURTHER H E SUBMITTED THAT THE ASSESSEE RECEIVED UNSECURED LOANS FROM VA RIOUS PARTIES AND THIS IS A CAPITAL RECEIPT WHICH CANNOT BE TRE ATED AS A REVENUE RECEIPT AND TAXED. HE SUBMITTED THAT THERE WAS CHANGE IN THE MANAGEMENT, AND THIS CHANGE IN MANAGEMENT WAS APPROVED BY BIFR AND ON ACCOUNT OF CHANGE OF MANAGEMENT, THE ASSESSEE WAS U NABLE TO SECURE CONFIRMATION LETTERS FROM THE RESPECTIVE PARTIES. HE SUBMITTED THAT THE DEPARTMENT HAS NO MATERIAL TO SHOW THAT THE DISPUTED AMOUNT CONSTITUTES THE CONCEALED INCOME OF THE ASSESSEE OR ASSESSEE HAD 3 CONCEALED THE PARTICULARS OF INCOME AND AS SUCH PENALTY CAN NOT BE LEVIED. FURTHER, HE SUBMITTED THAT PENALTY PROCEEDIN GS ARE INDEPENDENT FROM ASSESSMENT PROCEEDINGS AND SUBMITTED THAT PENALTY WILL NOT BE IMPOSED UNLESS THE PARTY EITHER ACTED DELI BERATELY IN DEFIANCE OF LAW OR GUILTY OF CONDUCT OF CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. HE SUBMITTE D THAT WHILE DEALING WITH THE PENALTY PROCEEDINGS, THE MATTER HAS TO BE EXAMINED INDEPENDENTLY AS THE QUESTION OF PENALTY WOULD ARISE O NLY IF THE ASSESSEE HAS EITHER CONCEALED ITS INCOME OR FURNISHED INACCURA TE PARTICULARS THEREOF. HE RELIED ON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT V. BHARAT ENGINEERING AND CONSTRUCTION CO.83 ITR 187 (SC), WHEREIN IT WAS HELD THAT THE INFERENCE DRAWN FR OM THE FACTS PROVED WAS A QUESTION OF FACT AND THE TRIBUNALS FINDI NG ON THAT QUESTION WAS FINAL. A CONSTRUCTION COMPANY TOOK TIME TO EARN PROFITS AND IT COULD NOT HAVE EARNED A HUGE PROFIT WITHIN A FEW DAYS AFTER THE COMMENCEMENT OF ITS BUSINESS. HENCE, IT WAS REASONABLE TO ASSU ME THAT THE CASH CREDIT ENTRIES REPRESENTED CAPITAL RECEIPT W AS THOUGH FOR ONE REASON OR ANOTHER THE ASSESSEE HAD NOT COME OUT WITH THE TRUE STORY AS REGARDS THE SOURCE OF THE RECEIPTS. IN THE CASE O F ADDITIONAL COMMISSIONER OF INCOME TAX, PUNJAB J&K ETC. CIT V. SADI Q ALI AND BROTHERS, 92 ITR 276 (J&K), WHEREIN IT WAS HELD THAT FROM A PERUSAL OF SEC.271(1) OF THE INCOME TAX ACT, 1961, IT IS MANIFEST TH AT BEFORE THIS SECTION CAN APPLY, THE AUTHORITY CONCERNED MUST BE SATISFIE D THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR DELIB ERATELY FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. ALTHOUGH THE SECTION DOES NOT REQUIRE MENS REA, YET, AS THE PROVISIONS ARE OF A PURELY PENAL NATURE, SOME AMOUNT OF CULPABLE NEGLIGENCE OR WILLFUL OMISSION ON THE PART OF THE ASSESSEE MUST BE ESTABLISHED BEFORE PENALTY C AN BE LEVIED. IN THE CASE OF CIT V. BHURMAL MANIKCHAND 130 ITR 129 (CALCUTTA),IT 4 WAS HELD THAT THE PROVISIONS OF SEC.68 OF THE I.T.ACT, 19 61, UNDER WHICH CASH CREDITS FOUND IN ACCOUNTS AREA TREATED AS INCOME O F THE PREVIOUS YEAR IN WHICH THEY ARE FOUND ARE CONFIRMED T O ASSESSMENT PROCEEDINGS: THEY DO NOT EXTEND TO PENALTY PROCEEDINGS. CERTAIN AMOUNTS SHOWN AS CASH CREDITS WERE ADDED TO THE ASSESSEES INCOM E FOR THE ASSESSMENT YEARS 1960-61, 1961-62 AND 1962-63. THE ASSESSMENT PROCEEDINGS WERE COMPLETED AFTER APRIL 1, 1962 . IN THE PENALTY PROCEEDINGS INITIATED U/S 271 (1) OF THE I. T.ACT, 1961, THE IAC EXAMINED THE EVIDENCE AND FOUND THAT THE ASSESSEE H AD TRANSACTIONS OUTSIDE ITS REGULAR BOOKS OF ACCOUNT AND THAT THE BASIS OF ADDITION TO ITS INCOME WERE DOCUMENTS AND ACCOUNTS SEIZED B Y THE ENFORCEMENT DIRECTORATE AND IMPOSED A PENALTY U/S 271 ( 1) . THE TRIBUNAL HELD THAT ALTHOUGH THE CASH CREDITS WERE ASSESSABL E U/S 68 AS INCOME OF THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YE ARS IN QUESTION, SEC.68 COULD NOT BE EXTENDED TO PENALTY PROCEE DINGS AND CANCELLED THE ORDER OF PENALTY. IT WAS FURTHER HELD T HAT FOR THE ASSESSMENT YEARS 1960-61 AND 1961-62, THE ASSESSMENT HAD BEE N COMPLETED AFTER APRIL 1, 1962, AND AS SUCH THE PENALTY COULD BE IMPOSED U/S 271 (1) . AND THAT THERE WAS CLEAR FINDING BY THE IAC THAT THE DISPUTED AMOUNTS REPRESENTED INCOME AND THE ASSE SSEE HAD CONSCIOUSLY CONCEALED PARTICULARS OF HIS INCOME AND HAD DELIB ERATELY FURNISHED INACCURATE PARTICULARS. HOWEVER, THERE WAS NO FINDING THAT THE AMOUNTS CONSTITUTED THE INCOME OF THE ASSESSEE IN THE RELEVANT PREVIOUS YEARS. PENALTY COULD NOT THEREFORE, BE IMPOSE D ON THAT BASIS. 4. FURTHER, HE RELIED ON THE JUDGEMENT OF THE APE X COURT IN THE CASE OF CIT V. SMT.P.K.NOORJAHAN 237 ITR 570 (SC). 5 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD. SECTION 68 OF THE ACT IS A STATUTORY RECOGNITION WHERE CERTAIN SUMS OF MONEY WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN BORROWED FROM CERTAIN PERSONS, IT IS FOR THE ASSESSEE TO PROVE BY COGENT AND PROPER EVIDENCE THAT THESE WERE GENUINE BOR ROWINGS AS THE FACTS ARE EXCLUSIVELY WITHIN THE KNOWLEDGE OF THE ASSESSEE . IN THE INSTANT CASE, THE ASSESSEE WAS NOT ABLE TO DISCHARGE THE BUR DEN CAST UPON ITS SHOULDER WITH REGARD TO THE IDENTITY, CAPACI TY OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION. THE ASSESSEE DID NOT GIVE ANY FURTHER INFORMATION WHETHER THESE CREDITORS COULD BE TR ACED OR WHETHER THE TRANSACTIONS ARE GENUINE OR NOT. THERE WAS NO EVID ENCE ADDUCED REGARDING THE TRANSACTION. HAVING REGARD TO THESE CIRCU MSTANCES, THE ASSESSING OFFICER REACHED A CONCLUSION THAT IT IS AN UNEXP LAINED INCOME OF THE ASSESSEE AND ACCORDINGLY LEVIED PENALTY U/S 271 (1 ) OF THE ACT. THE MAIN CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSEE IS HAVING NO SOURCE OF INCOME IN THE YEAR UNDER APPEAL AND FAILURE TO PROVE THE CREDIT TO THE SATISFAC TION OF THE ASSESSING OFFICER CANNOT BE REASON FOR LEVY OF PENALTY. B UT WE ARE NOT PREPARED TO ACCEDE TO THE ARGUMENT ADVANCED BY THE ASSES SEES COUNSEL THAT THE IMPUGNED AMOUNT IS A CAPITAL RECEIPT BE LONGING TO SOMEBODY ELSE IS NOT ENOUGH TO HOLD THAT THE AMOUNT R EPRESENTED THE CONCEALED INCOME OF THE ASSESSEE. WE HAVE GONE THROUGH TH E FACTS OF THE CASE. THE ASSESSING OFFICER HAS GIVEN AMPLE OPPORTUNI TY TO THE ASSESSEE TO PROVE THE CREDIT. THE ASSESSEE HAD NOT EVEN FIL ED CONFIRMATION LETTERS FROM THE CREDITORS. THE PRIMARY B URDEN CAST UPON THE ASSESSEE WAS NOT DISCHARGED. THE PLEA OF THE ASSESSEE BE FORE THE 6 LOWER AUTHORITIES WAS THAT THE ASSESSEE IS A SICK UNIT AND T O CLEAR ITS DUES, ASSESSEE HAS TAKEN CERTAIN UNSECURED LOANS FROM VARIOUS PARTIES AND DUE TO LACK OF TIME AND CHANGE OF MANAGEMENT THE ASSESSEE FAILED TO FILE THE CONFIRMATION LETTERS. IN OUR OPINION, THE DEPARTMENT IS NOT REQUIRED TO DISCHARGE THE ONUS OF PROVING THAT THE ASSESSE E HAD CONCEALED THE INCOME WHEN THE ASSESSEE ITSELF WAS NOT ABLE TO DISCHARGE THE PRIMARY BURDEN CAST UPON IT. IN SUCH CIRCU MSTANCES, THE CONCLUSION IS IRRESISTIBLE THAT THE ASSESSEE HAD CONCEALED THE INCOME. IN A CASE, WHERE THE ASSESSEE ITSELF HAS FAILED TO DISCHARGE ITS INITIAL BURDEN, THEN IT IS TO BE CONCLUDED THAT THE AMOUNT IN QUESTION REPRESENTS THE INCOME OF THE ASSESSEE, NO FURTHER EVIDENCE WOULD BE NECESSARY TO SHOW THAT IT WAS THE AMOUNT WHICH REPRESENTED ITS INCOME AND THAT IT REPRESENTS ITS CONCEALED INCOME. THERE FORE, IT CANNOT BE SAID THAT THE DEPARTMENT HAD ANY FURTHER DU TY TO SHOW THAT THE ASSESSEE HAS NOT CONCEALED ITS INCOME AND THE DEPARTMEN T IS NOT REQUIRED TO PROVE THAT THE ASSESSEE HAS CONCEALED ITS INCOME . BECAUSE, AFTER ALL, THE ASSESSEE HAD TRANSACTIONS WITH THE CREDITORS AND THEY HAD LENT SUBSTANTIAL AMOUNT TO THE ASSESSEES BUSINESS . THEREFORE, ABOUT THE FINANCIAL POSITION AND CREDIBILIT Y OF THESE PERSONS, IT IS NOT UNNATURAL TO PRESUME THAT THE ASSESSEE COULD KNO W. IT HAS TO BE BORNE IN MIND THAT THAT THE ASSESSING OFFICER HAD GIV EN AMPLE OPPORTUNITY TO ADDUCE EVIDENCE IN SUPPORT OF ITS CLAIM WHICH THE ASSESSEE FAILED TO MEET WITH. IN THESE CIRCUMSTANCES, IT IS T O BE CONSTRUED THAT ASSESSEE HAS CONCEALED ITS INCOME AND THERE I S A PROVISION REGARDING DEEMED CONCEALMENT IN THE FORM OF EXPLANATION TO SEC.271 (1 OF THE ACT., WHICH READS AS FOLLOWS: EXPLANATION 1: WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, 7 (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB SECTION, BE DEEM ED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. IT IS CLEAR FROM THE ABOVE EXPLANATION THAT THE STATU TE VISUALIZED ASSESSMENT AND PENALTY PROCEEDINGS TO BE WHOLLY DISTINCT A ND INDEPENDENT OF EACH OTHER. PART B OF THE EXPLANATI ON IS THAT THE PERSON MUST PROVIDE AN EXPLANATION WHICH IS BONA FIDE A ND IT SHOULD SUBSTANTIATE THAT EXPLANATION BY SOME EVIDENCE WITH HIM . IF IT FAILS TO DO SO, ITS EXPLANATION MAY BE TREATED AS UNTENABLE. O NLY WHEN THE ASSESSEE IS ABLE TO OFFER REASONABLE EXPLANATION, BASED ON SOME EVIDENCE, THE ASSESSING OFFICER CANNOT INVOKE PART B OF T HE EXPLANATION UNLESS IT HAS GIVEN FINDING BASED ON SOME CONTRADICTORY E VIDENCE TO DISPROVE THAT EXPLANATION OFFERED BY THE ASSESSEE WHICH T HE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND FAILED TO PROVE THAT SUCH EXPLANATION IS BONA FIDE THAT ALL FACTS RELATING TO THE SAME AND MAT ERIAL COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY IT. IN TH IS VIEW OF THE MATTER, WE ARE OF THE OPINION THAT PENALTY IS LEVIAB LE U/S 271 (1) (C) OF THE ACT. 8 7. THE ASSESSEES COUNSEL RELIED ON VARIOUS JUDGMENTS, WHICH ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE , ESPECIALLY IN THE CASE OF CIT V. BHURMAL MANICKCHAND 130 ITR 129 (CAL CUTTA). IN THIS CASE, THE CREDITORS WERE EXAMINED BY THE ASSESSING OFFI CER AND ON ACCOUNT OF LACK OF EVIDENCE, CREDITS WERE TREATED AS INCOM E AND THEREAFTER PENALTY WAS LEVIED. IN THE PRESENT CASE, TH ERE IS NO EVIDENCE WHATSOEVER REGARDING THE IDENTITY, CAPACITY AN D GENUINENESS OF THE TRANSACTION. FURTHER, THE JUDGEMENT RELIED UPO N BY THE ASSESSEES COUNSEL IN THE CASE OF ADDL.CIT PUNJAB, J & K ETC. V. SADIQ ALI AND BROTHERS, 92 ITR 276 (J&K) AND THE JUDGEMEN T IN THE CASE OF BHURMAL MANICKCHAND CITED SUPRA WERE DELIVERED BY PLACI NG RELIANCE ON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT V. ANWARALI, 76 ITR 696 (SC) AND THIS JUDGEMENT IS NO MORE GOOD LAW I N VIEW OF THE EXPLANATION ADDED TO SEC.271 (1) W.E.F. 1964 AND TH IS JUDGEMENT WAS RENDERED IN THE YEAR 1970 AND THE VARIOUS HIGH COU RTS HAVE HELD THE SAME TO BE STATUTORILY SUPERSEDED. FOR THIS PURPOSE , WE PLACE RELIANCE ON THE JUDGEMENT IN THE CASE OF CIT VS. JEEVAN LAL SAH (205 ITR 244) WHEREIN HELD THAT : EVEN AFTER THE AMENDMENT OF 1964, PENALTY PROCEEDIN GS CONTINUE TO BE PENAL PROCEEDINGS. SIMILARLY, THE QUESTION WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME CONTINUES TO R EMAIN A QUESTION OF FACT. WHERE THE EXPLANATION HAS MADE A DI FFERENCE IS WHILE DECIDING THAT QUESTION THE PRESUMPTION CREATED BY IT H AS TO BE APPLIED, WHICH HAS THE EFFECT OF SHIFTING THE BURDEN OF PROOF. T HE RULE REGARDING BURDEN OF PROOF ENUNCIATED IN CIT VS. ANWAR ALI (1970 ) 76 ITR 696 (SC) IS NO LONGER VALID. WHETHER IT IS A CASE OF UNDI SCLOSED OR UNEXPLAINED CASH DEPOSIT OR ANY OTHER CONCEALMENT THE STA NDARD IS THE 9 SAME. THE PRINCIPLE ENUNCIATED IN ANWAR ALIS CASE THAT MERE REJECTION OF THE EXPLANATION OF THE ASSESSEE IS NOT SUFFICIENT FOR LEVYING PENALTY NO LONGER HOLDS GOOD AND IT IS NO LONGER NECESSARY THAT THE DEPARTMENT MUST GO FURTHER AND ESTABLISH THAT THERE WAS CONSCIOUS CONCEALMENT OF PARTICULARS OF INCOME OR A DELIBERATE FAI LURE TO FURNISH ACCURATE PARTICULARS. THE CASE TO WHICH THE EXPLANATION IS ATTRACTED HAVE TO BE DECIDED IN THE LIGHT OF THE LAW ENUNCIATE D IN THE CASES OF MUSSADILAL RAM BHAROSE (165 ITR 14) (SC) AND SANDAYAPP AN (185 ITR 49 (SC). 7.1 IN THE CASE OF BHARAT ENGINEERING & CONSTRUCTION CO MPANY CITED SUPRA, CASH CREDIT ENTRIES COULD NOT REPRESENT INCOME OF T HE ASSESSEE COMPANY AS THEY WERE ALL MADE VERY SOON AFTER THE COMP ANY COMMENCED ITS ACTIVITIES AND A CONSTRUCTION COMPANY TAKES TI ME TO EARN PROFITS AND IT COULD NOT HAVE EARNED PROFITS WITH IN A FEW DAYS, AFTER THE COMMENCEMENT OF ITS BUSINESS. THIS IS NOT THE POSITION IN THE PRESENT CASE AND THE ASSESSEE ALREADY IN THE BUSINESS AS A GO ING CONCERN. FURTHER, THIS JUDGEMENT WAS DELIVERED UNDER THE 1922 ACT. IT WAS HELD IN THAT CASE THAT A LARGE AMOUNT OF CASH APP EARING ON THE VERY FIRST DAY OF THE ACCOUNTING YEAR WAS NOT ASSESSABLE IN THAT YEAR AS IT WAS NOT POSSIBLE FOR THE ASSESSEE TO MAKE SUCH A HUGE INCOME ON THE VERY SAME DAY ON WHICH THE ASSESSEE STARTED BUSINESS FOR THAT YEAR. WHEREAS, UNDER SEC.68 OF THE I.T.ACT, 1961, EVE N IN A CASE WHERE AN AMOUNT IS CREDITED ON THE VERY FIRST DAY OF T HE ACCOUNTING YEAR AND THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT ACCEPTED SUCH AMOUNT MAY BE ASSESSED AS INCOME OF THE ASSESSEE OF THE ACCOUN TING YEAR FOR WHICH THE BOOKS ARE MAINTAINED. 10 8. FURTHER, THE ARGUMENT OF THE ASSESSEES COUNSEL IS THAT EVEN AFTER EXPLANATION 4 TO SEC. 271 (1) OF THE ACT, NO PENALTY COULD BE LEVIED, WHERE THERE IS LOSS OR NIL INCOME IS DETERMINE D AND NO TAX IS PAYABLE. IN OUR OPINION, THIS ARGUMENT HOLDS NO MERI T IN VIEW OF THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT V. GOLD COIN HEALTH FOOD P.LTD. 304 ITR 308 (SC), WHEREIN IT WAS HELD TH AT EXPLANATION 4 TO SEC.271 (1) (III) OF THE INCOME TAX ACT, 1961, RE GARDING THE IMPOSITION OF PENALTY EVEN IF THE RETURNED INCOME IS A LOSS, IS CLARIFICATORY AND NOT SUBSTANTIVE. IT APPLIES EVEN TO ASSESSMENT YEARS PRIOR TO APRIL, 2003, THE DATE ON WHICH IT WAS BROUGH T INTO FORCE. WHAT THE FINANCE ACT, 2002, INTENDED WAS TO MAKE THE POSITIO N EXPLICIT WHICH OTHERWISE WAS IMPLIED. 8.1 THE OTHER ARGUMENT OF THE ASSESSEES COUNSEL IS THAT NO SATISFACTION HAS BEEN RECORDED IN THE ASSESSMENT ORDER WHER E THE ASSESSEE HAS CONSCIOUSLY CONCEALED THE INCOME OR FURNISHED INACCUR ATE PARTICULARS OF INCOME. THIS ARGUMENT OF THE ASSESSEE IS A LSO DEVOID OF ANY MERIT IN VIEW OF THE INSERTION OF CLAUSE (1B) TO E XPLANATION 7 BY THE FINANCE ACT, 2008 WITH A RETROSPECTIVE EFFECT FROM 1-4-1989, WHICH READS AS BELOW: (1B) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPU TING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR IN ITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE OF SUB SECTION (1), SU CH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF TH E PENALTY PROCEEDINGS UNDER THE SAID CLAUSE ( C ). 11 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 -11-2009 SD/- SD/- (N.R.S. GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 20-11-2009. *VNR COPY FORWARDED TO: 1. SHRI MARUTI ORGANICS LATD., 3-6-735/1, STREET NO.1 2, HIMAYATNAGAR, HYDERABAD. 2. ACIT, CIRCLE 16(2), HYDERABAD. 3. CIT(A)-V, HYDERABAD. 4.CIT, AP, HYDERABAD. 5.. THE D.R., ITAT, HYDERABAD.