JSL Industries Ltd, v. The ACIT., Anand Circle,, Anand

ITA 2567/AHD/2008 | 2002-2003
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 256720514 RSA 2008
Assessee PAN AAACJ4986F
Bench Ahmedabad
Appeal Number ITA 2567/AHD/2008
Duration Of Justice 2 year(s) 6 month(s) 17 day(s)
Appellant JSL Industries Ltd,
Respondent The ACIT., Anand Circle,, Anand
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 28-01-2011
Date Of Final Hearing 05-01-2011
Next Hearing Date 05-01-2011
Assessment Year 2002-2003
Appeal Filed On 11-07-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI MUKUL SHRAWAT JM & SHRI A N PAHUJA AM ITA NO.2567/AHD/2008 (ASSESSMENT YEAR:-2002-03) JSL INDUSTRIES LIMITED AT & PO: MOGAR ANAND V/S ASSISTANT COMMISSIONER OF INCOME-TAX ANAND RANGE ANAND PAN : AAACJ 4986 F [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI J P SHAH AR REVENUE BY:- SHRI DILEEP KUMAR DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 28-04-2008 OF THE LD. CIT(APPEALS)-I BARODA RAISE S THE FOLLOWING GROUNDS:- 1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- IV HAS ERRED IN CONFIRMING THE PENALTY FOR DISALLOWANCE OF SEMINAR EXPENSES. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV OUGHT NOT T O HAVE CONFIRMED THE PENALTY. 2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- IV HAS ERRED IN CONFIRMING THE PENALTY FOR THE DISALLOWANCE OF RENT . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS)-IV OUGHT NOT TO HAVE CONFIR MED THE PENALTY. 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING INCOME OF RS.94 65 330/- FILED ON 30-10-2 002 BY THE ASSESSEE STATED TO BE ENGAGED IN THE BUSINESS OF M ANUFACTURE AND SALE OF SWITCHGEARS INSTRUMENT TRANSFORMERS AIR C IRCUIT BREAKERS LT SWITCHBOARDS ETC. AFTER BEING PROCESSED ON 11.2.20 03 U/S 143(1) OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO A S THE ACT] WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 22.10.2003.DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT AN AMOUNT OF RS.4 25 000/- WAS PAID TO M/S SHASHI SALES & MARKET ING PVT. ITA NO.2567/AHD/2008 2 LTD. DELHI FOR CONDUCTING SEMINAR AND CONFERENCES T O PROMOTE THE PRODUCTS OF THE ASSESSEE COMPANY. THOUGH THE PAYMEN TS WERE MADE BY ACCOUNT PAYEE DRAFTS TO A QUERY BY THE AO THE ASSESSEE DID NOT FURNISH THE DETAILS SUCH AS NATURE OF SEMIN AR VENUE TOPICS PARTICIPANTS ETC. ENQUIRIES WERE MADE BY THE ASSESS ING OFFICER THROUGH THE ADDITIONAL DIRECTOR OF INCOME-TAX (INVE STIGATION) NEW DELHI WHO VIDE HIS LETTER DATED 5/01/2005 INFORME D THAT IN HIS STATEMENT RECORDED ON 5/01/2005 SHRI SURENDER PAL SINGH ONE OF THE DIRECTOR OF M/S SHASHI SALES & MARKETING PVT. L TD. CATEGORICALLY STATED THAT THEY WERE NOT REALLY IN ANY BUSINESS BU T WERE ENGAGED IN GIVING ENTRIES TO THE NEEDY PERSONS BY ACCEPTING CA SH FROM THE CUSTOMERS AND ISSUING CHEQUES FOR ACCOMMODATION. HE ADMITTED THAT THOSE CUSTOMERS WHO MADE PAYMENTS BY DEMAND DRAFT/C HEQUES WERE RETURNED CASH AFTER DEDUCTING THEIR COMMISSION . TO A SPECIFIC QUESTION HE ADMITTED THAT THEIR COMPANY HAD NOT EN TERED INTO ANY BUSINESS TRANSACTION WITH M/S JSL INDUSTRIES LTD. A ND THAT THEY ACCEPTED DEMAND DRAFT FROM THEM AS WAS BEING DONE WITH OTHER CUSTOMERS FOR ACCOMMODATION AND IN TURN PAID BACK CASH TO THEM. SINCE THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND SATISFACTORY IN LIGHT OF THE STATEMENT OF SHRI SURENDRA PAL SINGH R EGARDING GENUINENESS OF THE CLAIM OF EXPENSES ON SEMINAR AND THAT THE CLAIM WAS BOGUS ONE AN AMOUNT OF RS.4 25 000/- WAS DISAL LOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. BESIDES AN AMOUNT OF RS.1 80 000/- CLAIMED AS RENT PAID TO SHR I RAHUL AMIN A DIRECTOR OF THE COMPANY FOR THE OPEN LAND WAS DISA LLOWED THE ASSESSEE HAVING FAILED TO ESTABLISH THEIR CLAIM THA T THE LAND WAS USED FOR HOLDING CONFERENCES BY THE COMPANY .INTER ALIA PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIATED FOR T HESE DISALLOWANCES. ON APPEAL THE LD. CIT(A) UPHELD TH ESE DISALLOWANCES VIDE HIS ORDER DATED 11/11/2005 IN TH E FOLLOWING TERMS: ITA NO.2567/AHD/2008 3 SEMINAR EXPENSES I HAVE GONE THROUGH THE SUBMISSIONS OF THE A.R. AND THE FINDINGS OF THE A.O. AND OBSERVE THAT IN REPLY TO THE QUESTION NO.3 & 4 OF THE STATEMENT THE DIRECTOR OF M/S. SHASHI SALES AND MA RKETING PVT. LTD SHRI SURENDRA PAL SINGH MADE THE FOLLOWING ADMISSIO NS:- 'ANS. 3. WE ARE NOT KEEPING ANY ACCOUNTS. THE PERSO N WHO WANTS ENTRY FROM JUS PAYS US CASH. WE DEPOSIT THIS CASH IN OUR ACCOUNT AND INSTEAD PAY ORDERS / CHEQUES / D.DS ARE ISSUED. WE GIVE ENTRIES FOR EXPENSES A/SO. IN SUCH CASES WE DEPOSIT CHEQUE/P.P.(PAY ORDER OF THE PART IN OUR AC COUNT AND THERE AFTER WE WITHDRAW CASH AND PAY BACK TO TH E PARTY CONCERNED.IN THIS TRANSACTION WE GET COMMISSION OF 0.25%'. 'ANS. 4. AS I HAVE ALREADY STATED WE ARE DOING THE BUSINESS OF ENTRY ACCOMMODATION. WE DO NOT MAINTAIN ANY ACCO UNT OF SUCH ACCOMMODATION. WE HAVE NOT DONE ANY REAL BUSIN ESS WITH JSL. WE HAVE TAKEN DDS. FROM THEM AND WE HAVE GIVEN BACK CASH TO THEM. IN VIEW OF THE ABOVE CATEGORICAL ADMISSION ON PART OF THE APPELLANT THAT THEY WERE PROVIDING FICTITIOUS ACCOM MODATION ENTRIES TO THE BENEFICIARIES LIKE ASSESSEE AFTER CH ARGING COMMISSION OF 0 25% .AND THAT THE AMOUNT SHOWN TO H AVE BEEN PAID BY VARIOUS PERSONS WAS RETURNED BACK EITHER TH ROUGH CASH OR DEMAND DRAFTS OR CHEQUES I HOLD THAT THE CLAIM OF EXPENSES OF RS.4 25 000/- INCURRED BY THE ASSESSEE IS BOGUS ACCORDINGLY THE ADDITION MADE BY THE A.O. IS CONFI RMED. AS REGARDING NOT GRANTING OF OPPORTUNITY FOR CROSS- EXAMINATION OF SHRI SURENDRA PAL SINGH DIRECTOR OF M/S. SHASHI SALES AND MARKETING PVT. LTD. IS CONCERNED I WOULD LIKE TO OBSERVE THAT (THERE IS NO SPECIFIC GROUND OF THIS NATURE MADE BY THE APPELLANT IN THE GROUNDS OF APPEAL BUT THEN ALSO I WOULD LIKE TO COMMENT ON THE ISSUE.) IT HAS BEEN HELD IN THE C ASES OF STATE OF J&K VS BAKSHI GHULAM MOHD. AIR 1967 (SC) 122 131AND NATH INTERNATIONAL SALES VS UOI AIR 199 2 DEL. 295 302 THAT THE RIGHT OF HEARING DOES NOT INCLUDE A RIGHT TO CROSS-EXAMINE. THE RIGHT TO CROSS EXAMINE MUST DEPE ND UPON THE CIRCUMSTANCES OF EACH CASE AND ALSO ON THE STAT UTE CONCERNED. FURTHER THE RIGHT TO CROSS-EXAMINATION IS NOT AN ABSOLUTE RIGHT. THE QUESTION WHETHER THE ASSESSEE I S ENTITLED TO CROSS-EXAMINATION IS A QUESTION WHICH MAY LARGEL Y DEPEND ITA NO.2567/AHD/2008 4 ON THE FACTS AND CIRCUMSTANCES OF THE CASE (SHYAM L AL BIRI MERCHANT VS UOI (1993) 68 ELT 548 551 (ALL.)). IT HAS ALSO BEEN LAID DOWN IN .K. THOMAS VS STATE OF KERALA 40 STC 278 288 (KER.) THAT THE DECISION OF THE SUPREME COURT I N SHADULI'S CASE 39STC478. (SC) CANNOT BE UNDERSTOOD AS RECOGNI ZING A RIGHT OF CROSS-EXAMINATION AS AN INVARIABLE ATTRIBU TE OF THE REQUIREMENT OF REASONABLE OPPORTUNITY. THE SUPREME COURT HAS STATED THE RULE WITH SUFFICIENT ELASTICITY. HENCE IN VIEW OF THESE COURT DECISIONS I AM OF THE VIEW THAT THE TE CHNICALITIES OF INDIAN EVIDENCE ACT CANNOT BE APPLIED RIGIDLY IN A QUASI JUDICIAL FUNCTION PERFORMED BY THE AO WHO HIMSELF H AD NOT RECORDED THE STATEMENT HENCE THE ARGUMENTS MADE B Y THE AR ON THIS ACCOUNT ARE REJECTED SPECIALLY IN THE BACKG ROUND WHEN NO SUCH SPECIFIC REQUEST WAS MADE BEFORE THE AO DUR ING THE ASSESSMENT PROCEEDINGS. RENT AT THE TIME OF THE HEARING OF APPEAL ALSO THE APP ELLANT DID NOT HAVE MUCH TO SAY EXCEPT THAT THE LAND WAS USED FOR SEMINAR AND CONFERENCE BUT NO SUPPORTING EVIDENCE WAS FILED . AS A RESULT THE DISALLOWANCE MADE BY THE AO IS CONFIRME D. 2.1 ON FURTHER APPEAL BY THE ASSESSEE THE ITAT VIDE THEIR ORDER DATED 08/09/2006 IN ITA NO. 85/AHD/2006 SUSTAINED T HESE DISALLOWANCES IN THE FOLLOWING TERMS: SEMINAR EXPENSES 4.1 WE FIND CONSIDERABLE FORCE IN THE REVENUES CASE AND THE ARGUMENTS AS ADVANCED IN SUPPORT THEREOF. THE A SSESSEE IS A COMPANY ENGAGED IN MANUFACTURING AND SALE OF ELECTR IC SWITCH GEARS INSTRUMENT TRANSFORMERS AIR CIRCUIT BREAKER S L.T. SWITCHBOARDS AND OTHER RELATED PRODUCTS BASED AT VILLAGE MAGAR DISTRICT: ANAND 4.2 THE PRINCIPLE RULE FOR CLAIMING ANY EXPENDITURE AS A BUSINESS OUTGOING/EXPENSE IS THAT THE ONUS IS ON THE ASSESSE E TO PROVE THE SAME. IN THE PRESENT CASE WE FIND ITS CLAIM AS BEI NG FINDING BEREFT OF ANY EVIDENCE. WHEN AND WHERE WERE THE BUSINESS MEETING/SEMINARS HELD ? WHO WERE THE PARTICIPANTS? THESE AND VARIOUS RELATED QUESTIONS ARISE IN RELATION TO ITS CLAIM. THE SAME IN FACT ARC ONLY THE PRIMARY FACTS AND WHICH WERE NEC ESSARILY REQUIRED TO BE GIVEN BY THE ASSESSEE AND WHICH IT HAS NOT RELYING SOLELY ON BALD AND GENERALIZED STATEMENTS. NO EXPENDITURE IN RELATION TO TRAVEL TO AND BACK FROM THE VENUE (OF THE MEETING / SEMINA RS) ETC. STAND INCURRED BY THE ASSESSEE; I.E. AS PER ITS BOOKS AN D WHICH WOULD DEFINITELY BE IF NOT FOR THE OUTSIDE PARTICIPANTS AT LEAST FOR THE ITA NO.2567/AHD/2008 5 COMPANYS OWN EMPLOYEES AND DIRECTORS ATTENDING TH E SAME. SUCH BUSINESS MEETINGS IT MAY BE ADDED ARE A REGULAR F EATURE IN THE CORPORATE WORLD AND ARE UNDERTAKEN GENERALLY IN HO TELS AS THEY HAVE IN PLACE THE NECESSARY WHEREWITHAL FOR THE PU RPOSE PROVIDING ALL THE NECESSARY INFRASTRUCTURAL FACILITIES VIZ. LOCAL CONVEYANCE RESIDENTIAL FACILITIES CONFERENCE HALLS EQUIPPED W ITH AUDIO/VIDEO GADGETS COMMUNICATION/COMPUTING FACILITIES DINING /BANQUET HALLS ETC. ALSO SO THAT THE ENGAGEMENT OF AN OUTSIDE AGE NCY FOR THE PURPOSE IS EVEN OTHERWISE NOT CONSISTENT WITH THE P RACTICE OR UNDERSTANDABLE FROM THE STAND-POINT OF BUSINESS PRU DENCE OR COMMERCIAL EXPEDIENCY. IN FACT IT CLAIMS TO HAVE R ECEIVED SUBSTANTIAL ORDERS FROM DELHI VIDYUT BOARD DURING T HE YEAR AND A SUBSTANTIAL CHUNK OF ITS BUSINESS (REPRESENTING 20% TO 25% OF ITS TURNOVER) IS WITH IT'S OWN PARENT CONCERN M/S JYOT I LTD. AND WHICH IT CONTENDS TO BE SUPPLYING IT WITH DRAWINGS ETC. SO THAT NO SUCH ORGANIZED BUSINESS MEETINGS WERE REQUIRED FOR AT LE AST FOR ITS SAID TWO PRINCIPAL CUSTOMERS. 4.3 THE REVENUE HAS SUFFICIENTLY IMPUGNED THE ASSES SEE'S CLAIM. NON ALLOWANCE OF OPPORTUNITY FOR CROSS-EXAMINATION THAT IT ARGUES ALSO WE FIND AS OF NO MOMENT IN THE FACTS OF THE C ASE WITH IT LEADING NO EVIDENCE IN SUPPORT OF ITS CLAIM AND WHICH IN C ASE OF AN ACTUAL UNDERTAKING OF THE STATED MEETINGS / SEMINARS THER E WOULD BE APLENTY SO THAT THE ONUS DID NOT SHIFT TO THE REVE NUE; THE DEPOSITION ONLY REINFORCING THE REVENUE'S CASE. THE LAW IN THE MATTER I.E. OF THE NATURE OF THE RIGHT TO CROSS-EXAMINE STANDS DU LY DISCUSSED BY THE ID. CIT(A) IN HIS ORDER. THE TECHNICAL RULES OF EVIDENCE ARE NOT APPLICABLE TO THE PROCEEDINGS UNDER THE INCOME-TAX ACT 1961 ('ACT' FOR SHORT). THE ASSESSEE HAS NOT POINTED OUT ANY RE ASON AS TO WHY THE PAYEE WOULD HAVE RETRACTED; IT HAVING ACCEPTED THE PAYMENT THROUGH THE BANKING CHANNEL I.E. WHAT IS THE NATU RE & THE BASIS OF THE MISUNDERSTANDING THAT HAS LED IT .TO ASSUME A P OSITION CONTRARY TO THE STATED/DOCUMENTARY ONE. ALSO IT COULD HAVE ON ITS OWN PRODUCED THE SAID PAYEE REQUIRING HIM TO SLATE THE TRUTH AND FURTHER THE CIRCUMSTANCES AND REASONS UNDER WHICH THE EARLIER 'INCORRECT' STATEMENT(S) STOOD MADE. WE FIND THE PR INCIPLES INVOLVED IN AS ALSO EXPLAINING THE SCOPE OF APPRECIATION OF EVIDENCE IN ASSESSMENT PROCEEDINGS UNDER THE ACT AS DISCUSSED AND ELUCIDATED BY THE HON'BLE APEX COURT IN VARIOUS CELEBRATED CAS ES VIX. DURGA PRASAD MORE'82 ITR 540 LASHMINARAYAN MADANLAL 86 I TR 439 SUMATI DAYAL 214 ITR 801 TO LIST SOME AS SQUARELY APPLICABLE IN THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN THE ORDER OF THE ID. CIT(A) ON THIS GR OUND AND UPHOLD THE SAME. . ITA NO.2567/AHD/2008 6 RENT 10. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIALS ON RECORD. 10.1 WE ARE IN AGREEMENT WITH THE STAND OF THE REVE NUE. THE SAID EXPENSE STANDS CLAIMED IN RESPECT OF A PERIOD THAT GOES BEYOND THE PREVIOUS YEAR WHICH COMMENCES ONLY ON 01.04.2001 S O THAT THE CLAIM FOR RS.60.000/- DESERVES TO BE REJECTED AT TH E THRESHOLD. 10.2 THE ASSESSCC HAS CLAIMED TO HAVE A GOOD PRESEN CE IN NORTHERN INDIA AND THAT AS IT DID NOT HAVE THE ORGANIZATIONAL CAPACITY OR RESOURCES AT NEW DELHI IT HIRED THE SERVICES OF SSMPL FOR ARRANGING THE SEMINAR(S) THEREAT THOUGH THE DE TAILS IN RESPECT THEREOF AND THEREFORE OF THE SERVICES ACTUALLY RE NDERED BY THE SAID FIRM WERE MISSING. IT NOW CLAIMS TO HAVE HIRED / R ENTED AN OPEN PLOT OF LAND FOR THE SAID PURPOSE AT VILLAGE VALADARA. T HE TWO CLAIMS ARE CONTRADICTORY. FURTHER HOW THE LAND WAS FOUND SUIT ABLE FOR THE PURPOSE FOR WHICH IT WAS RENTED AND HOW THE SAME W OULD ACTUALLY BE UTILIZED FOR THE PURPOSE OF CONDUCTING CONFERENCES GIVEN THAT THERE IS NO STRUCTURE THEREON LEAVE ALONE PROPER INFRAST RUCTURAL FACILITIES WHICH ORGANIZING OF SUCH A BUSINESS MEETING NECESSA RILY ENTAILS BESIDES THE BOARDING AND LODGING OF THE OUT-STATION PARTICIPANTS ETC. ARE QUESTIONS/ASPECTS WE FIND AS TOTALLY UNAD DRESSED BY IT EVEN AS THE ANSWER THERETO PROVIDE THE BASIS ON WHI CH ITS CLAIM RESTS. STILL FURTHER HOW AND WHY NO CONFERENCE COU LD ACTUALLY BE HELD EVEN AS THE ASSESSEE WOULD ONLY REASONABLY SP EAKING ENTER INTO SUCH AN ARRANGEMENT WHERE THE HOLDING OF SUCH CONFERENCE(S) IS NOT ONLY EMINENT BUT ALSO VISUALIZED AS A RECURRIN G FEATURE SO THAT IT SHALL NOT HAVE TO UNDERGO THE PROCESS OF HIRING A SUITABLE PROPERTY EVERY TIME A CONFERENCE IS TO BE HELD. ALSO EVEN I F CONSIDERING THAT IT HAD CONTEMPLATED ENVISAGING A REGULAR USER OF T HE SAID PROPERTY FOR THE PURPOSE CONSTRUCTING A STRUCTURE THEREON IT WOULD ONLY HAVE ENTERED INTO A LONG-TERM AGREEMENT AS ALSO PROCEED ED TO TAKE REQUISITE STEPS FOR THE PURPOSE. THE CLAIM HOWSOE VER VIEWED APPEARS UN-GENUINE. IT IS ITS GENUINENESS THAT THE REVENUE ASSAILS SO THAT THE CLAIM OF THE ID. AR THAT THE SAME HAS N OT BEEN DOUBTED BY IT IS MISPLACED. THE CASE LAW AS RELIED UPON IN UPHOLDING THE DISALLOWANCE AGITATED VIDE GROUND NO.1 (REFER PARA 4.3 ) OF THE PRESENT APPEAL WOULD ALSO BE FULLY APPLICABLE FOR T HIS GROUND AS WELL. WE ACCORDINGLY DISMISS THIS GROUND. 2.1. THEREAFTER IN RESPONSE TO A SHOWCAUSE NOTICE DATED 23.2.2007 BEFORE LEVY OF PENALTY THE ASSESSEE REPLIED VIDE L ETTER DATED 12.3.2007 IN RELATION TO SEMINAR EXPENSES THAT 'IN THIS CASE YOUR ASSESSEE HAD ORGANIZED SEMINAR A ND HAD PAID THE AMOUNT FOR THE SAME. YOUR ASSESSEE HAD RECEIVED SUB STANTIAL ORDERS FROM ITA NO.2567/AHD/2008 7 DELHI VIDYUT BOARD AND MORE ORDERS WERE LIKELY TO F OLLOW. A SALES PROMOTION SEMINAR OR SIMILAR EVENT WAS THEREFORE TH OUGHT TO BE ABSOLUTELY ESSENTIAL. THE SEMINAR WAS CONDUCTED. NOW THE DEPAR TMENT HAS DISALLOWED THE EXPENSES AND DISALLOWANCE HAS BEEN C ONFIRMED MAINLY ON THE GROUND THAT ONE OF THE DIRECTOR OF M/S SHASHI S ALES MARKETING TO WHOM THIS PAYMENT WAS MADE ADMITTED THAT HE WAS NOT A GE NUINE BUSINESSMAN AND THAT HE WAS IN THE ACCOMMODATION ENTRY BUSINESS . THE ENTIRE ADDITION REVOLVES ROUND THE STATEMENT OF ONE OF THE DIRECTOR MR. SURENDER PAL SINGH. THE STATEMENT MADE BY THE DIRECTOR MR. SUREN DER PAL SINGH WHICH IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE HAS BE EN ACCEPTED AS CORRECT AND FINAL AND THE ADDITION IS MADE. NOW WHE NEVER ANY PERSON MAKES ANY PAYMENT RECEIPT IS IMMEDIATELY DEMANDED. EVEN IN OUR EVERY DAY LIFE FOR A SMALL PAYMENT ALSO A RECEIPT IS DEMA NDED. HERE THE DIRECTOR ALLEGES THAT THE ENTIRE PAYMENT IS RETURNED AFTER R ETAINING A SMALL PORTION BUT DOES NOT PRODUCE ANY EVIDENCE FOR HAVING RETURN ED THE MONEY. HE DOES NOT FIND THE SAME NECESSARY THAT RECEIPT BE OB TAINED FOR ANY PAYMENT MADE. THE STATEMENT THEREFORE CANNOT BE SAID TO BE CONCLUSIVE EVIDENCE FOR THE ADDITION. AGAIN IN BUSINESS A HOST OF TRANS ACTIONS TAKE PLACE. IT CANNOT BE POSSIBLE FOR ANY PERSON TO REMEMBER ALL O F THEM THAT TOO AFTER A PERIOD OF TIME SINCE THEIR OCCURRENCE. TO ACCEPT TH E STATEMENT THEREFORE WITHOUT ANY DOCUMENTARY EVIDENCE IS IN OUR RESPECTF UL SUBMISSION INCORRECT. THE ADDITION ITSELF THEREFORE SUFFERS FR OM INHERENT WEAK LEGAL SUPPORT. HOWEVER ARGUING WITHOUT ACCEPTING EVEN IF THE STAT EMENT AND ADDITION IS ACCEPTED AS CORRECT THE SAME CANNOT BECOME A BASE F OR LEVY OF PENALTY. PENALTY PROCEEDINGS BY THEIR VERY NATURE ARE QUASI CRIMINAL IN NATURE AND NEED TO BE VIEWED ACCORDINGLY. IN THIS CASE A STATE MENT NOT SUPPORTED BY DOCUMENTARY OR MATERIAL EVIDENCE IS TAKEN AS BASE FOR ADDITION CANNOT BY ITSELF FORM THE BASE OF LEVY OF PENALTY. AS MENTION ED EARLIER PENALTY PROCEEDINGS BEING QUASI CRIMINAL IN NATURE CONCLUSI VE EVIDENCE IS NEEDED TO PROVE THE FACT. SINCE THE STATEMENT OF THE DIREC TOR IS NOT SUPPORTED BY ANY MATERIAL EVIDENCE AND AGAIN NOT CROSS EXAMINED SUFFERS FROM LACK OF AUTHENTICITY TO BECOME EVIDENCE FOR THE LEVY OF PEN ALTY. IN OUR SUBMISSION THEREFORE TO LEVY PENALTY IN THIS CASE ON THE PRESE NT FACTS WOULD BE TOTALLY WRONG INCORRECT AND UNJUSTIFIED. IF IS THEREFORE PR AYED THAT PENALTY INITIATED BE DROPPED.' 2.2 AS REGARDS LEVY OF PENALTY IN RESPECT OF DISAL LOWANCE OF RENT THE ASSESSEE SUBMITTED THAT 'YOUR ASSESSEE HAD TAKEN OPEN LAND AT VADODARA ON L EASE FROM SHRI RAHUL R AMIN. THE RENT ON THE SAME IS DISALLOWED ON LY BECAUSE THE LAND COULD NOT BE PUT TO USE. NOW IT SO HAPPENS IN BUSI NESS THAT YOU TAKE SOME PREMISES OR LAND ON LEASE WITH A VIEW TO GAINF ULLY UTILIZE THE SAME. BUT FOR SOME REASONS BEYOND YOUR CONTROL AND NOT AN TICIPATED EARLIER THE PREMISES CANNOT BE GAINFULLY EMPLOYED AS ENVISAGED. THE CLAIM OF THE EXPENDITURE HOWEVER CANNOT BECOME NON-GENUINE. IT I S THEREFORE HUMBLY SUBMITTED THAT ADDITION IS INCORRECT. NOW FOR ARGUM ENT SAKE SUPPOSE IT IS ITA NO.2567/AHD/2008 8 ACCEPTED AS CORRECT IT CANNOT BECOME A GROUND FOR P ENALTY. PENALTY PROCEEDINGS PRESUPPOSE 'MENS REA' I.E. INTEREST TO DEFRAUD THE REVENUE. THIS FRAME OF MIND IS TOTALLY ABSENT SINCE THE EXPE NDITURE INCURRED CAN BE SEEN EASILY TRACED FROM DETAILS FILED AND THERE WAS NO ATTEMPT TO EVADE OR CAMOUFLAGE THE EXPENDITURE. FURTHER THE EXPENDITURE IS SO SMALL AS COMPARED TO THE TOTAL INCOME THAT NO PRUDENT BUSINE SSMAN WOULD EVEN THINK OF DEBITING SUCH SMALL EXPENDITURE IF THEY WE RE NOT GENUINE. IF IS THEREFORE SUBMITTED THAT ON FACTS OF THE CASE THE RE IS NO GROUND FOR LEVY OF PENALTY. THE PENALTY INITIATED THEREFORE BE DROPPED . 3. HOWEVER THE AO REJECTED THE AFORESAID SUBMIS SIONS IN RELATION TO SEMINAR EXPENSES IN THE FOLLOWING TERMS:- 6.3 I HAVE CAREFULLY CONSIDERED THE REPLY OF THE A SSESSEE ON THIS ISSUE. HOWEVER THE SAME IS NOT ACCEPTABLE FOR THE FOLLOWI NG REASONS- (I) INSTEAD OF SUBSTANTIATING ITS CLAIM THE ASSESS EE HAS GIVEN A GENERAL REPLY WHICH IS NOT CONVINCING. (II) THE STATEMENT OF SHRI SURENDER PAL SINGH DIRE CTOR OF SHASHI SALES MARKETING WAS RECORDED U/S 131 OF THE ACT ARID HAS TO BE CONSIDERED AS RELIABLE EVIDENCE. (III) THE TECHNICALITIES OF INDIAN EVIDENCE ACT CAN NOT BE APPLIED RIGIDLY IN A QUASI JUDICIAL FUNCTION PERFORMED BY THE ASSESSIN G OFFICER PARTICULARLY WHEN THE ASSESSING OFFICER HAD NOT REC ORDED THE STATEMENT OF SHRI SURENDER PAL SINGH. (IV) THE CROSS-EXAMINATION BY THE ASSESSEE WAS NOT SOUGHT FOR BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS (V) IT IS FOR THE ASSESSEE TO PROVE THE GENUINENESS AND BUSINESS EXPEDIENCY OF THE CLAIM OF ANY EXPENDITURE. NO PROO F WHATSOEVER WAS ADDUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AND SO THE ONUS TO ESTABLISH ITS CASE IS VERY MUCH UPON THE AS SESSEE. (VI) EVEN THE ASSESSEE COULD NOT ESTABLISH WHERE AN D WHEN THE BUSINESS SEMINAR WAS HELD AND WHO THE OTHER PARTICI PANTS WERE. (VII) THE ASSESSEE HAD NOT FURNISHED NAME OF THE E MPLOYEES WHO ATTENDED THE SEMINAR DATE(S) ON WHICH SEMINAR WAS ARRANGED. HAD THERE BEEN ANY EXPENDITURE ON ACCOUNT OF TRAVELLIN G EXPENSES OF EMPLOYEES AND DIRECTORS FOR ATTENDING SUCH SEMINA R THE ASSESSEE COULD HAVE FURNISHED THE SAME IN SUPPORT OF ITS CLA IM. (VIII) THE ASSESSEE HAS SUBSTANTIAL CHUNK OF ITS BU SINESS WITH ITS OWN ASSOCIATE CONCERN VIZ M/S JYOTI LTD. AND DELHI VIDY UT BOARD. NO ITA NO.2567/AHD/2008 9 ORGANIZED SEMINARS WERE REQUIRED FOR THE BUSINESS W ITH THESE PRINCIPAL CUSTOMERS. (IX) GENERALLY WHEN SUCH A SEMINAR IS ARRANGED PHO TOGRAPHS ARE TAKEN. IF AT ALL SUCH SEMINAR WAS ARRANGED THE ASSESSEE C OULD HAVE SHOWN THE SAME IN SUPPORT OF ITS CLAIM OF EXPENSES. (X) SINCE THE MATTER WAS THOROUGHLY PROBED BY THE I NVESTIGATION WING OF THE DEPARTMENT THEREFORE THERE IS NO SCOPE FOR DRAWING ANY OTHER INFERENCE. (XI) IT IS ALSO NOT BELIEVABLE WHY THE PAYEE REACTE D IN SUCH A WAY HAVING ACCEPTED THE PAYMENT FROM THE ASSESSEE. THE ASSESSE E COULD NOT ESTABLISH THE NATURE AND THE BASIS OF THE MISUNDERS TANDING WHICH LED IT TO ASSUME A POSITION CONTRARY TO THE DOCUMEN TARY PROOF IN THE FORM OF STATEMENT OF SHRI SURENDER PAL SINGH. (XII) THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF SERVICES ACTUALLY RENDERED BY THE SAID FIRM. (XIII) ALSO AGAINST THE EVIDENCE COLLECTED BY THE ASSESSING OFFICER THROUGH THE ADDL DIT(LNV) NEW DELHI ESTABLISHING THAT THE SAID TRANSACTION WAS MERELY AN ACCOMMODATION ENTRY THE ASSESSEE DID NOT PRODUCE ANY MATERIAL TO COUNTER SUCH EVIDENCE DURING THE APPELLATE PROCEEDINGS. 3.1 IN RESPECT OF RENT EXPENSES OF RS1 80 000/- TH E AO OBSERVED AS UNDER:- 6.5 I HAVE CAREFULLY CONSIDERED THE EXPLANATION OF THE ASSESSEE ON THIS ISSUE. HOWEVER THE SAME IS NOT BONAFIDE AND HENCE THE SAME IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS- (I) THE ARGUMENT OF THE ASSESSEE THAT THE AMOUNT IS SMALL AS COMPARED TO ITS TOTAL INCOME IS NOT A PARAMETER FOR HOLDING THE CLAIM AS GENUINE. IF ANY EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE REGARDLESS OF THE AMOUNT CLAIMED THE ONUS IS UPON THE ASSESSEE TO PROVE THE GENUINENESS AND COMMERCIAL EXPEDIENCY. (II) THE EXPENSES WERE CLAIM BEYOND THE PERIOD RELE VANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. (III) ON ONE HAND THE ASSESSEE IS ARGUING THAT THE SEMINARS WERE ORGANIZED AT NEW DELHI FOR WHICH THE SEMINAR EXPENS ES WERE CLAIM WHEREAS ON THE OTHER HAND THE ASSESSEE IS CLAIMING THAT LAND WAS RENTED FOR SUCH SEMINARS OR CONFERENCES PARTICULARL Y WHEN NO INFRASTRUCTURE FACILITIES BOARDING AND LODGING FAC ILITIES FOR THE ITA NO.2567/AHD/2008 10 PARTICIPANTS ARE AVAILABLE AT THE SO CALLED RENTED PREMISES IN A SMALL TOWN/ VILLAGE. NO PRUDENT BUSINESSMAN WOULD SELECT SUCH A PLACE FOR ORGANIZING SEMINAR / CONFERENCE AT A PLACE .LAC KING SUCH FACILITIES. (IV) THE GENUINENESS OF THE ASSESSEE'S CLAIM IS DEP ENDENT ON THE ABOVE ASPECTS / QUESTIONS. 3.2 IN THE LIGHT OF HIS AFORESAID OBSERVATIONS TH E AO CONCLUDED THAT THE ASSESSEES EXPLANATION IS NOT BONAFIDE AND THAT TH E ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME. ACCORDINGLY INTER ALIA HAVING RECOURSE CLAUSE-B OF THE EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT THE AO IMPOSED A PENALTY OF RS. 2 15 985/- @ 100% OF THE TAX SOUGH T TO BE EVADED ON THE INCOME OF RS. 6 05 000/-. 4. ON APPEAL THE LD. CIT(A) UPHELD THE LEVY O F PENALTY IN RELATION TO SEMINAR EXPENSES IN THE FOLLOWING TERMS:- 2.4 I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER AND THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE. THE HONBLE TRIBU NAL HAS RIGHTLY HELD THAT PRIME ONUS FOR CLAIMING AN EXPENDITURE AS A BU SINESS EXPENSE LIES ON THE ASSESSEE. EVIDENCE THAT SUCH AN EXPENDITURE HAS GENUINELY BEEN INCURRED IS TO BE FILED BY THE ASSESSEE AS AND WHEN CALLED FOR. IN THE CURRENT CASE THE APPELLANT HAS BEEN UNABLE TO ESTA BLISH THE GENUINENESS OF HIS CLAIM THAT A SUM OF RS.4 25 000/- WAS PAID F OR THE PURPOSE OF HOLDING SEMINARS BY THE COMPANY. THE ASSESSING OFFI CER WAS THEREFORE JUSTIFIED IN LEVYING PENALTY U/S. 271(L)(C) OF THE INCOME TAX ACT. THE SAME IS THEREFORE CONFIRMED. 4.1 AS REGARDS LEVY OF PENALTY IN RESPECT OF ADDIT ION OF RS.1 80 000/- ON ACCOUNT OF RENT THE LEARNED CIT(A ) UPHELD THE LEVY OF PENALTY WITH THE FOLLOWING OBSERVATIONS:- 3.3. I HAVE CONSIDERED THE PENALTY ORDER AND THE S UBMISSIONS OF THE AUTHORIZED REPRESENTATIVE. THE HIGHEST FACT FINDING AUTHORITY HAS FOUND THE CLAIM OF THE APPELLANT TO BE UN-GENUINE. THE AS SESSING OFFICER WAS THEREFORE JUSTIFIED IN LEVYING PENALTY U/S. 271(L) (C) OF THE INCOME TAX ACT ON THIS ADDITION ALSO. THE SAME IS THEREFORE CONFIRME D. 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LD. AR WHILE CA RRYING US THROUGH ITA NO.2567/AHD/2008 11 THE FINDINGS OF THE ITAT IN THE QUANTUM APPEAL CONT ENDED THAT AT THE TIME OF PREPARATION OF RETURN PAYMENT FOR THE SEMINAR EXPENSES WAS MADE BY ACCOUNT PAYEE CHEQUE AND THE SUBSEQUENT STATEMENT OF DIRECTOR OF M/S SHASHI SALES & MARKETING PVT. LT D. WAS NEVER TESTED BY CROSS EXAMINATION. AS REGARDS LEVY OF PEN ALTY IN RELATION TO DISALLOWANCE OF RENT EXPENSES THE LD. AR POINTED O UT THAT RENT HAS ALREADY BEEN TAXED IN THE HANDS OF SAID DIRECTOR OF THE COMPANY. WHILE RELYING UPON DECISIONS IN TRIBHOVANDAS BHIMJI ZAVERI VS. CIT 247 ITR 727(BOM.) CIT VS. FIVE STAR HOLIDAYS 29 4 ITR 54(DEL.) & CIT VS. AMBIKA FORGINGS 157 TAXMAN 394(P&H) THE LD. AR POINTED OUT THAT IF PAYEE IS TAXED ON AN AMOUNT TH EN THE SAID AMOUNT CAN NOT BE DISALLOWED IN THE HANDS OF THE PA YER. WHILE REFERRING TO THE DECISIONS IN NEW SORATHIA ENGINEER ING COMPANY VS. CIT 282 ITR 642 (GUJ) AND CIT V. MANU ENGINEERING W ORKS 122 ITR 376(GUJ) THE LD. AR FURTHER SUBMITTED THAT THE A O IN THE ASSESSMENT ORDER INITIATED THE PENALTY PROCEEDINGS FOR CONCEALING PARTICULARS OF INCOME WHILE PENALTY HAS BEEN LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE CLAUSE B OF E XPLANATION 1 TO SEC. 271(1)(C) IS NOT APPLICABLE TO LEVY OF PENALT Y FOR FURNISHING INACCURATE PARTICULARS OF INCOME NOR THE CLAIM MADE BY THE ASSESSEE HAS BEEN ESTABLISHED TO BE FALSE PARTICULARLY WHEN THE STATEMENT OF SHRI SURENDERA PAL SINGH WAS NOT NEVER TESTED THROU GH CROSS- EXAMINATION. INTER ALIA THE LD. AR RELIED UPON THE DECISION IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158. THE LEARNED DR ON THE OTHER HAND WHILE CARRYING US TH ROUGH THE IMPUGNED ORDERS AND RELEVANT PAGES OF THE PAPER BO OK SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE. THE PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER TH IS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS WELL S ETTLED THAT ASSESSMENT ITA NO.2567/AHD/2008 12 PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AN D DISTINCT AND AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF ANANTHRAMAN VEERASINGH AIAH & CO. VS. CIT 123 ITR 457 THE FINDINGS IN THE ASSESSMENT PROCEEDINGS CAN NOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENALTY PROCEEDINGS. IT IS ALSO WELL SETTLED THAT THE CRITERION AND YARDSTICKS FOR THE PURPOSE OF IMPOSING PENALTY U/S 271(1)(C) OF THE ACT ARE DIFFERENT THAN THOSE APPLIED FOR MAKING OR CONFIRMING THE ADD ITIONS. IT IS THEREFORE NECESSARY TO REAPPRECIATE AND RECONSIDER THE MATTER SO AS TO FIN D OUT AS TO WHETHER THE ADDITION MADE IN THE QUANTUM PROCEEDINGS ACTUALLY REPRESENTS THE CONCEALMENT ON THE PART OF THE ASSESSEE AS ENVISAGED IN SEC. 271(1 )(C) OF THE ACT AND WHETHER IT IS A FIT CASE TO IMPOSE THE PENALTY BY INVOKING THE SAID PROVISIONS. THE PROVISIONS OF SECTION 271(1)( C ) OF THE ACT STIPULATE THAT IF THE ASSESSING OFFICER OR THE CIT(APPEALS) OR THE COMMISSIONER IN THE COURSE OF PROCEEDINGS UNDER TH IS ACT IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURN ISHED INACCURATE PARTICULARS THEREOF HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES T HE AMOUNT OF TAX SOUGHT TO BE EVADED BY A REASON OF THE CONCEALMENT OF PARTICULAR S OF HIS INCOME. EXPLANATION 1 TO SECTION 271(1)( C ) OF THE ACT MENTIONS THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THE ACT SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FO UND BY THE AO OR THE CIT (APPEALS) OR THE COMMISSIONER TO BE FALSE OR SUCH PERSON OFF ERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THEN THE AMOUNT ADDED OR DIS ALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSE OF CLAUSE ( C ) OF SECTION 271(1) BE DEEMED TO REPRESENT THE INCOME IN RESPEC T OF WHICH PARTICULARS HAVE BEEN CONCEALED. IN OTHER WORDS THE NECESSARY INGREDIEN TS FOR ATTRACTING EXPLANATION 1 TO SECTION 271(1)( C ) ARE THAT ( I ) THE PERSON FAILS TO OFFER THE EXPLANATION OR ( II ) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE A O OR THE CIT (APPEALS) OR THE COMMISSIONER TO BE FALSE OR ( III ) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABL E TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM. ITA NO.2567/AHD/2008 13 6.1 IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE T HREE CATEGORIES THEN THE DEEMING PROVISION PROVIDED IN EXPLANATION 1 TO SECTION 271(1)( C ) COMES INTO PLAY AND THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTIC ULARS HAVE BEEN CONCEALED FOR THE PURPOSES OF CLAUSE ( C ) OF SECTION 271(1) AND THE PENALTY FOLLOWS. ON TH E OTHER HAND IF THE ASSESSEE IS ABLE TO OFFER AN EX PLANATION WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME HAVE BEEN DISCLOSED BY HIM THE ASSESSEE SHALL BE OUT OF THE CLUTCHES OF EXPLANATION 1 TO SECTION 271(1)( C ) OF THE ACT AND IN THAT CASE THE PENALTY SHALL N OT BE IMPOSED. AS IS APPARENT FROM THE IMPUGNED ORDER IN THE INS TANT CASE THE LD. CIT(A) WHILE UPHOLDING LEVY OF PENALTY DID NOT ANALYSE TH E ISSUES RAISED BY THE ASSESSEE IN THEIR EXPLANATION NOR EXAMINED AS T O WHETHER OR NOT CLAUSE B OF THE EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT INVOKED BY THE AO WAS APPLICABLE IN THIS CASE NOR EVEN BROUGHT OUT AS TO WHETHER THE PENALTY IS LEVIABLE FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS THE REOF AND WHICH SPECIFIC PARTICULARS WERE CONCEALED OR FURNISHED IN ACCURATE. A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE NAMELY THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEFORE IT. TH E APPLICATION OF MIND TO THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST IT SELF IN THE ORDER. SECTION 250(6) OF THE INCOME TAX ACT 1961 MANDATES THAT TH E ORDER OF THE CIT(A) WHILE DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHA LL STATE THE POINTS FOR DETERMINATION THE DECISION THEREON AND THE REASON FOR THE DECISION. THE REQUIREMENT OF RECORDING OF REASONS AND COMMUNICATI ON THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PROCEDUR E. THE REQUIREMENT OF RECORDING OF REASONS BY THE QUASI-JUDICIAL AUTHORITIES IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARIT Y CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZ ES ARBITRARINESS IN THE ITA NO.2567/AHD/2008 14 DECISION-MAKING PROCESS. WE MAY REITERATE THAT A D ECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB (1995)1SCC 760(SC)]. AS IS APPARENT THE IMPUGNED ORDER SUFFERS FROM LACK OF R EASONING AND IS NOT A SPEAKING ORDER. IN VIEW OF THE FOREGOING ESPECIA LLY WHEN THE LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER ON THE ISSUES RAISED IN T HIS APPEAL WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. C IT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE VARIOUS ISSUES IN RELATI ON TO LEVY OF PENALTY AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPO RTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL T HE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER KEEPING IN MIND INTER ALIA THE MA NDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT. WITH THESE OBSERVATIONS GROUND NOS. 1 &2 IN THE APPEAL ARE DISPOSED OF. 7.. IN THE RESULT APPEAL IS ALLOWED BUT FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 28-01-2011 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 28 -01-2011 COPY OF THE ORDER FORWARDED TO: 1. JSL INDUSTRIES LIMITED AT & PO: MOGAR ANAND 2. ACIT ANAND RANGE ANAND 3. CIT CONCERNED 4. CIT(A)-I BARODA 5. DR ITAT AHMEDABAD BENCH-C AHMEDABAD 6. GUARD FILE BY ORDER DEPUT Y REGISTRAR/ASSISTANT REGISTRAR ITAT AHMEDABAD