M/s Desai & Co, Hubli v. Addl. CIT, Hubli

ITA 501/BANG/2010 | 2006-2007
Pronouncement Date: 10-08-2010 | Result: Allowed

Appeal Details

RSA Number 50121114 RSA 2010
Bench Bangalore
Appeal Number ITA 501/BANG/2010
Duration Of Justice 3 month(s) 27 day(s)
Appellant M/s Desai & Co, Hubli
Respondent Addl. CIT, Hubli
Appeal Type Income Tax Appeal
Pronouncement Date 10-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 10-08-2010
Assessment Year 2006-2007
Appeal Filed On 13-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.501/BANG/2010 ASSESSMENT YEAR : 2006-07 M/S. DESAI & CO. P.B. ROAD VIDYANAGAR HUBLI. : APPELLANT VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 1 NAVANAGAR HUBLI. : RESPONDENT APPELLANT BY : SHRI PRASAD R. SIRMATH ADVOCATE RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI ADDL. C IT(DR) O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE FIRM IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A) HUBLI IN ITA NO:47/CIT(A) HBL/09-10 DAT ED: 7.1.2010 FOR THE ASSESSMENT YEAR 2006-07 [PENALTY ORDER U/S 271(1)(C ) OF THE ACT]. 2. THE ASSESSEE FIRM [THE ASSESSEE IN SHORT] HA S RAISED TWELVE GROUNDS WHICH ARE RATHER ILLUSTRATIVE AND NARRATIVE IN NATU RE. HOWEVER THE CRUX OF THE GRIEVANCE OF THE ASSESSEE IS CONFINED TO ITA NO.501/BANG/10 PAGE 2 OF 15 THAT THE AUTHORITIES BELOW ERRED IN IMPOSING A PENALTY O F RS.24 23 520/- UNDER S.271(1)(C) OF THE ACT AND CO NFIRMING THE SAME. 3. THE ISSUE IN BRIEF IS THAT THE ASSESSEE - IN THE BUSINESS AS DEALERS IN TRACTORS TRAX VEHICLES SPARE PARTS AND ACCESSORIE S FURNISHED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER DISPUTE ON 30 .10.2006 ADMITTING AN INCOME OF RS.59.10 LAKHS WHICH WAS INITIALLY PR OCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY DURING THE COURSE OF ASSESS MENT PROCEEDINGS ACCORDING TO THE AO CERTAIN DISCREPANCIES WERE NOT ICED IN THE BOOKS OF ACCOUNT AND ASSESSEE WAS REQUIRED TO CLARIFY THE SA ME BY 26.12.2008. ACCORDING TO THE AO THE ASSESSEE VIDE ITS LETTERS DATED: 24.12.2008 AND AGAIN ON 30.12.2008 HAD FURNISHED THE CLARIFICATION S WITH REGARD TO (I) CUSTOMER RELATIONSHIP; (II) SUNDRY DEBTORS AND CRED ITORS; (III) BAD DEBS WRITTEN OFF; (IV) TRADE DISCOUNT ETC AS EXTRACTED I N THE ASSESSMENT ORDER. HOWEVER THE AO HAD DISPUTED THE ASSESSEES CLAIM A S SET-OUT IN THE IMPUGNED ASSESSMENT ORDER. IN THE MEANWHILE THE A SSESSEE HAD FURNISHED A REVISED RETURN OF INCOME ON 30.12.2008 ADMITTING A REVISED INCOME OF RS.1 31 11 000/- WHICH INCLUDED RS.11.80 LAKHS BEING BAD DEBTS WRITTEN OFF AND RS.60.20 LAKHS TOWARDS THE CLAIM O F DISCOUNT. 3.1. THE AO CONCLUDED THE ASSESSMENT BY ACCEPTIN G THE REVISED RETURN OF INCOME. IT WAS THE CASE OF THE AO THAT WHEN THE AS SESSEE WAS CONFRONTED WITH THE GLARING EVIDENCES AND LACUNAS FOUND IN THE ACCOUNTS MAINTAINED THE ASSESSEE CAME FORWARD TO FILE A REVISED RETURN BUT FOR THE THOROUGH AND METICULOUS VERIFICATION OF THE BOOKS OF ACCOUNT VO UCHERS ETC. THE ASSESSEE WOULD NOT HAVE FILED A REVISED RETURN. ACCORDING T O THE AO AS THE ITA NO.501/BANG/10 PAGE 3 OF 15 ASSESSEE HAD CONCEALED ITS PARTICULARS OF INCOME P ENAL PROCEEDINGS U/S 271 (1)(C) OF THE ACT WERE INITIATED. 3.2. IN THE PENAL PROCEEDINGS TOO THE AO NARRAT ED AND RATHER REITERATED WHAT HAD BEEN RECORDED IN THE ASSESSMENT ORDER AND CONCLUDED THAT 4. THE EXPLANATION OF THE ASSESSEE IS NOT A PLAUSI BLE EXPLANATION BUT FOR THE DEPARTMENTS EFFORTS THE ASSESSEE WOULD NOT HAVE FILED THE REVISED RETURN AND PAID THE TAXES. UNDER THE CIRCUMSTANCES THE E XPLANATION FILED BY THE ASSESSEE IS NOT ACCEPTABLE AND HENCE I HEREBY LEV Y A MINIMUM PENALTY U/S 271(1)(C) WHICH WORKS OUT TO RS.24 23 520/-. 4. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUE WITH THE LD. CIT (A) FOR RELIEF. THE CIT (A) AFTER CONSIDERING THE ASSESSE ES CONTENTIONS AND ALSO ANALYZING THE SCORES OF CASE LAWS ON WHICH THE ASSE SSEE PLACED STRONG RELIANCE HAD OBSERVED THUS 5. THE ABOVE ANALYSIS CLEARLY ESTABLISHES THAT THE APPELLANT HAS CONCEALED AND FURNISHED INACCURATE PARTICULARS AS R EGARDS THE TRADE DISCOUNT AND BAD DEBTS BY ADHERING TO THE COLORABLE DEVISE WITH THE MOTIVE TO REDUCE THE TAXABLE PROFITS. THEREFORE T HE AO IS JUSTIFIED IN INITIATION AND LEVY OF PENALTY OF RS.2423520/- U/S 271 (1)(C) OF THE ACT. THE RATIO OF THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PR ESENT APPELLANT AS HAS ELABORATELY BEEN DISCUSSED IN THE FOREGOING PAR AS WHILE DEALING WITH THE RATIO OF THE JUDGMENTS RELIED UPON BY THE APPELLANT. THUS HAVING REGARD TO THE MATERIAL FACTS AND THE CIRCUMS TANCES IT IS HELD THAT IT IS A FIT CASE FOR LEVY OF PENALTY WHICH IS CONFIRMED. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION OF UOI & OTHERS V. DHARMENDRA TEXTILES PROCESSORS 306 ITR 277 (SC) WHE REIN PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY WILLFUL CONCEALMENT IS NOT A ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION U/S 276C THAT THE LEVY OF PEN ALTY IS MANDATORY AND NO DISCRETION IS LEFT WITH THE COMPETENT AUTHOR ITY IS MADE CLEAR BY SECTION 11AC INTRODUCED BY FINANCE ACT 1996. RELIANCE IN THIS REGARD IS ALSO PLACED ON THE DECISION OF THE APEX C OURT IN THE CASE OF CIT V. ATUL MOHAN BINDAL REPORTED (2009) IN 317 ITR 1 (HONBLE ITA NO.501/BANG/10 PAGE 4 OF 15 SUPREME COURT) WHEREIN THE HONBLE HIGH COURT DELET ED THE PENALTY FOLLOWING EARLIER DECISION WHICH HAS BEEN HELD NOT GOOD LAW BY THE HONBLE SUPREME COURT THE MATTER REMITTED BACK TO THE HIGH COURT FOR FRESH CONSIDERATION IN THE LIGHT OF DECISION IN UOI & OTHERS V. DHARMENDRA TEXTILES PROCESSORS 306 ITR 277 (SC) UO I V. RAJASTHAN SPINNING AND WEAVING MILLS 224 CTR 1 (SC). 5. AGGRIEVED BY THE FINDING OF THE LD. CIT (A) I N TURNING DOWN ITS PLEA FOR RELIEF THE ASSESSEE HAS COME UP WITH THE PRESE NT APPEAL. 5.1. DURING THE COURSE OF HEARING THE LD. A R HA D PUT FORTH HIS SPIRITED ARGUMENTS AGAINST THE FINDING OF THE LD. CIT (A) T HE SUBSTANCES OF WHICH ARE SUMMARIZED AS UNDER: (I) PRIOR TO THE PASSING OF THE ASSESSMENT ORDER THE A SSESSEE VOLUNTARILY FILED A REVISED RETURN ON 30.12.08 ITSE LF ADMITTING AN INCOME OF RS.1.31 CRORES WHICH INCLUSIVE OF ADDING BACK THE BAD DEBTS WRITTEN OFF AND ALSO THE CLAIM OF DISCOUNT MA DE EARLIER; - THE CLAIM OF DISCOUNT WAS OFFERED VOLUNTARILY DUE T O CHANGE OF OPINION OF THE AO AS REGARDS THE METHODOLOGY IN GIV ING DISCOUNT TO THE FARMERS AND THE ASSESSEE TOOK IT TO BE THE PROPER GUIDANCE AND CORRECT LAW AS POINTED OUT BY T HE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS; THAT T HE BAD DEBTS WRITTEN OFF WAS ALSO VOLUNTARILY OFFERED AS T HE AO WAS OF THE VIEW THAT DEBT WRITTEN OFF DID NOT FORM PART OF THE BUSINESS RECEIPT IN THE PAST NOTWITHSTANDING THAT THESE AMOU NTS WERE ADVANCED AS MARGIN MONEY TO AGRICULTURALISTS DUE TO COMMERCIAL EXPEDIENCY; - THE INCOME ADMITTED IN THE REVISED RETURN WAS ACCEP TED BY THE AO IN TOTO AND THE ASSESSMENT WAS CONCLUDED ON THE VERY NEXT DAY I.E. ON 31.12.2008 AND NO ADDITION WAS MADE ON THE INCOME ADMITTED BY THE ASSESSEE; - WHILE CONCLUDING THE ASSESSMENT THE AO HAD CONCLUD ED THUS TOTAL INCOME AS PER REVISED RETURN DATED 30.12.200 8 AT RS.1 31 11 000/-; AND IN THE PENALTY ORDER TOO HE HAD CATEGORICALLY STATED THAT THE ASSESSMENT IS COMPLETED ACCEPTING THE REVISED RETURN; THUS NO QUANTIFICATION OF THE ALLEGED CONCEALED INCOME WAS BROUGHT OUT BY THE AO AND THE ITA NO.501/BANG/10 PAGE 5 OF 15 ASSESSMENT WAS CONCLUDED BASED ON THE VOLUNTARY EST IMATION MADE BY THE ASSESSEE WHICH HAS NOT BEEN CONTESTED B Y THE ASSESSEE IN AN APPEAL WHICH AMPLY DEMONSTRATES THAT THE ADDITIONAL INCOME WAS OFFERED VOLUNTARILY ; (II) WITH REGARD TO BAD DEBTS WRITTEN OFF ADVANCES GIVE N TO THE FARMERS WHO DID NOT HAVE SUFFICIENT AMOUNTS TO PAY UP THE MARGIN MONEY TO BANKS TO AVAIL THE LOANS FOR THE PURCHASE OF TRACTORS WITH A SOLE INTENTION OF TAPPING THE PROSPECTIVE CUSTOME RS FOR THE PURCHASE OF TRACTORS FROM THE ASSESSEE OTHERWISE T HE OTHER DEALERS WHO WERE IN THE WINGS WOULD HAVE LURED THE CUSTOMERS TO THEIR SIDE; - ONCE THE FARMERS WERE GIVEN MONEY THROUGH BEARER CHEQUES DEBIT THEIR ACCOUNTS AND THOSE PEOPLE WERE SHOWN AS DEBTORS IN THE ASSESSEES BOOKS OF ACCOUNT. SOME OF THE FARME RS WHO DEFAULTED IN PAYING UP THE NET AMOUNT DUE FROM THEM AFTER ADJUSTING THE DISCOUNT AMOUNTS CREDITED TO THEIR AC COUNTS AGAINST THE LOANS DISBURSED BY THE BANKS ON THEIR BEHALF WA S WRITTEN OFF AS BAD DEBTS IN THE P & L ACCOUNT; THAT THESE ADVANCES WERE EVIDENCED BY ENTRIES IN THE BOOKS OF ACCOUNT DULY S UPPORTED BY VOUCHERS AND RECEIPTS WHICH WERE VERIFIED BY THE AO ; (III) IN RESPECT OF DISCOUNT IT WAS CONTENDED THAT DISCO UNTS WERE GIVEN TO THE FARMERS BY ISSUANCE OF CREDIT NOTES IN THEIR FAVOUR WHICH WERE DULY ACKNOWLEDGED BY THEM AND ACCORDINGLY DEB ITED IN THE P & L ACCOUNT; THE DISCOUNT OFFERED WAS NOT DEDUCT ED FROM THE INVOICE VALUE IN VIEW OF THE FACT THAT THE ELIGIBIL ITY OF LOAN AMOUNT WHICH THE FARMER WAS ENTITLED TO FROM THE BANK GETS AUTOMATICALLY REDUCED. - THIS METHODOLOGY OF GIVING DISCOUNT WAS THE PREVAIL ING TRADE PRACTICE IN THIS LINE OF BUSINESS. IN VIEW OF THE FACT THAT SOME OF THE FARMERS WHO HAVE ALREADY RECEIVED PART OF DI SCOUNT IN THE FORM OF MARGIN MONEY AND FOR HE SAKE OF CONSIST ENCY THE DISCOUNTS TO ALL THE FARMERS INCLUDING THOSE WHO DI D NOT AVAIL THE MARGIN MONEY THIS METHODOLOGY OF ALLOWING DISC OUNT WAS FOLLOWED; - ASSESSMENTS FOR THE AYS 2002-03 2003-04 2004-05 A ND FOR THE AY UNDER DISPUTE HAVE ALL BEEN THE SUBJECT MAT TER OF SCRUTINY ASSESSMENTS AND THIS METHODOLOGY OF GIVING DISCOUNT AND WRITING OFF BAD DEBTS WERE ACCEPTED BY THE REVE NUE. THE DISCOUNTS EXTENDED TO THE FARMERS TO THE EXTENT OF RS.23.40 LAKHS RS.82.25 LAKHS RS.1.16 CRORES AND RS.1.58 C RORES FOR THE AYS 2002-03 2003-04 2004-05 AND 2006-07 RESPE CTIVELY ITA NO.501/BANG/10 PAGE 6 OF 15 WERE COMMENSURATE WITH THE INCREASE IN THE SALES TU RNOVER AS WELL AS DUE TO THE INCREASE IN THE PRICE OF TRACTOR S AND THESE VERY FACTS HAVE BEEN ACCEPTED BY THE REVENUE AND TH E METHODOLOGY OF ACCOUNTING FOR DISCOUNT ADOPTED BY T HE ASSESSEE WAS NOT PUT UNDER THE SCANNER; - LIKEWISE BAD DEBTS OF RS.24.18 LAKHS CLAIMED FOR T HE PRECEDING YEAR WAS ACCEPTED BY THE REVENUE IN THE SCRUTINY AS SESSMENT; - DIFFERENT VIEWS FORMED ON THE SAME SET OF FACTS COU LD BE TERMED AS DIFFERENCE OF OPINION BUT IT CANNOT BE CATEGOR IZED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME ON THE PART OF THE ASSESSEE; (IV) WHEN THE AO ACCEPTED THE INCOME VOLUNTARILY OFFERED BY THE ASSESSEE IN ITS REVISED RETURN DURING THE COURSE OF ASSESSMENT PROCEEDINGS INITIATION AND LEVY OF PENALTY FOR THE ALLEGED CONCEALMENT OF INCOME WAS AT BEST BE TERMED AS AR BITRARY. THERE WAS MERELY A CHANGE OF OPINION AS FAR AS THE METHODOLOGY IN RAISING INVOICES AND GIVING DISCOUNT TO THE FARM ERS THE CLAIM OF BAD DEBTS WERE CONCERNED. THOUGH THE ABOVE CLAIMS WERE ACCEPTED BY THE REVENUE OVER THE YEARS AND TO BUY P EACE WITH THE DEPARTMENT THESE CLAIMS (THOUGH GENUINE) WERE OFFE RED VOLUNTARILY AS INCOME OF THE ASSESSEE WHICH IN ANY STRETCH OF IMAGINATION COULD BE TERMED OR TANTAMOUNT TO CONCEA LMENT OF INCOME AS ALLEGED BY THE AUTHORITIES BELOW; - THE ASSESSEE WAS FORCED TO REVISE ITS INCOME VOLUNT ARILY AT THE PERSISTENT INSISTENCE OF THE AO DUE TO HIS CONTRARY OPINION ON THOSE ISSUES. THE ADDITIONAL AMOUNTS ADMITTED IN THE REVISED RETURN WAS OUT OF THE SAME TRADING RESULTS ONLY BU T WAS NOT OUTSIDE THE BOOKS OF ACCOUNT OF THE ASSESSEE; THAT THE BONA FIDE OF THE ENTRIES IN THE BOOKS OF ACCOUNT WHICH WERE S UPPORTED BY THE RELEVANT VOUCHERS CANNOT BE SUSPECTED; - THE ASSESSEE HAD IN FACT SATISFIED CLAUSE (A) & ( B)TO EXPLANATION 1 TO S.271(1)(C) OF THE ACT WHICH HAS N OT BEEN CONTESTED BY THE AO; . (V) THE CIT(A) HAD FAILED TO APPRECIATE THAT THE ADDITI ONS WERE ESTIMATED AND OFFERED BY THE ASSESSEE IN ITS REVISE D RETURN AND THAT MERELY BECAUSE THE AO HAD POINTED OUT SOME ALLEGED DEFECTS IN THE METHOD OF ACCOUNT IN CLAIMING DISCOUNT IT WAS CONTENTED IT DID NOT LEAD TO A CONCLUSION THAT THERE WAS A FAILU RE TO RETURN THE CORRECT INCOME BY MEANS OF FRAUD OR GROSS OR WILLFU L NEGLECT. HE ITA NO.501/BANG/10 PAGE 7 OF 15 HAD FURTHER FAILED TO APPRECIATE THAT THE ASSESSE E HAD DISCHARGED ITS ONUS BY PRODUCING THE BOOKS OF ACCOUNT WHICH CO NTAINED ALL THE ENTRIES WITH RESPECT TO DISCOUNT BAD DEBTS WRI TTEN OFF AND THUS LEVY OF PENALTY WAS BAD IN LAW [ CIT V. METAL PRODUCTS OF INDIA 150 ITR 714 (P & H )] RELIES ON THE CASE LAWS (A) CIT V. IQBAL SINGH & CO. (2009) 180 TAXMAN 355 (P & H); (B) CIT V. NARASIMHA PRASAD 250 ITR 852 (KAR); (C) ADDL. CIT V. PREMCHAND GARG 124 TTJ 433 (DEL) ( TM); (D) CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) (E) KANBAY SOFTWARE INDIA (P) LTD. V. DCIT (2009) 122 TTJ 721 (PUNE) (F) B.MUNIYAPPA GOUNDAR V. CIT 102 ITR 787 (MAD) (VI) EXPLANATION 1 TO S.271(1)(C) OF THE ACT WAS NOT AT TRACTED AT ALL IN AS MUCH AS THERE WAS NO ADDITION OR DISALLOWANCE MA DE BY THE AO WHO HAD ACCEPTED THE REVISED RETURN AND THUS T HE PENALTY LEVIED REQUIRES TO BE ANNULLED; (VII) THE AO AFTER ACCEPTING THE INCOME VOLUNTARILY DEC LARED BY THE ASSESSEE IN ITS REVISED RETURN HOWEVER LEVIED PE NALTY WHICH IS UNDER DISPUTE ON THE ADDITIONAL INCOME OFFERED BY T HE ASSESSEE. IT IS A MATTER OF FACT THAT THE ASSESSEE HAD SATISFIED CLAUSE (A)& (B) TO EXPLANATION 1 TO S.271(1)(C) WHICH WAS NOT REBUT TED BY THE AO. IT IS MORE IMPORTANT THAT EXPLANATION 1 TO S.271(1) (C) IS NOT ATTRACTED AS THERE WAS NO ADDITION OR DISALLOWANCE MADE BY THE AO WHO HAD ACCEPTED THE REVISED RETURN; (VIII) DURING THE ASSESSMENT PROCEEDINGS THE AO WITHOUT PROPERLY SCRUTINIZING THE BOOKS OF ACCOUNT AND ALSO DENYING SUFFICIENT OPPORTUNITY TO PROVE THE GENUINENESS OF THE CLAIMS ETC; JUMPED INTO A HASTE CONCLUSION THAT THERE WAS CONCEALMENT OF INCOME; - DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE IN ITS LETTER DT: 26.12.08 HAD BROUGHT OUT THAT DUE TO PAUCITY OF TIME AND ALSO DOMESTIC INCONVENIENCES IT HAD CAME FORWARD RATHER VOLUNTARILY FURNISHED A REVISED RETURN AND THUS THERE WAS NEITHER CONCEALMENT OF INCOME NOR FURNISHING O F INACCURATE PARTICULARS THEREOF WHICH WARRANTED LEVY OF ITA NO.501/BANG/10 PAGE 8 OF 15 PENALTY. THE ACT ON THE PART OF THE ASSESSEE WAS B ONA FIDE AND UNINTENTIONAL; - THE AO HAD NOT RECORDED THE SATISFACTION AS TO HOW THE ASSESSEE CONCEALED THE PARTICULARS OF INCOME OR FUR NISHED INACCURATE PARTICULARS OF SUCH INCOME DURING THE CO URSE OF ASSESSMENT PROCEEDINGS AND AS SUCH ASSUMING OF THE VERY JURISDICTION FOR INITIATION OF THE PENAL PROCEEDIN G WAS BAD IN LAW AND THAT THE ORDER OF ASSESSMENT DID NOT RECORD THE SATISFACTION AS WARRANTED BY S.271 OF THE ACT; - THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST THE ASSESSMENT ORDER AS THE REVISED RETURN WAS FILED ON THE PERSIS TENT INSISTENCE OF THE AO AND THE ASSESSMENT IN QUESTION WAS REGULARIZED ON THE BASIS OF THE REVISED RETURN WHIC H CLEARLY DEMONSTRATES THAT IT WAS DONE VOLUNTARILY TO BUY P EACE. (IX) ON HIS PART THE CIT(A) HAD GROSSLY ERRED IN OVERLO OKING THE FINDINGS OF THE HONBLE APEX COURT AS WELL AS THE J URISDICTIONAL HIGH COURT ON THE ISSUE; - THE CIT (A) ERRED TO APPRECIATE THAT THERE WAS NO F INDING THAT THE DETAILS FURNISHED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE; - A MERE MAKING OF THE CLAIM WHICH WAS NOT SUSTAINABL E IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCUR ATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO INACCURATE PART ICULARS OR CONCEALMENT OF INCOME. RELIES THE VERDICT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETR OPRODUCTS PVT. LTD. [2010] 322 ITR 158. 5.2. IN CONCLUSION IT WAS VEHEMENTLY PLEADED THAT AS THERE WAS NO CASE FOR INITIATING PENAL PROCEEDINGS AND LEVY OF P ENALTY U/S 271(1)(C) OF THE ACT THE IMPUGNED ORDER OF THE LD. CIT (A) CONFIRMI NG THE PENALTY IMPOSED BY THE AO REQUIRES TO BE ANNULLED. 5.3. ON THE OTHER HAND THE LD. D R IN HER UR GE HAD STOUTLY EMPHASIZED THAT EXPLANATION OFFERED BY THE ASSESSEE WAS NOT SU PPORTED BY ANY DOCUMENTARY EVIDENCE. IT WAS FURTHER STRESSED TH AT WHEN THE ASSESSEE ITA NO.501/BANG/10 PAGE 9 OF 15 WAS CONFRONTED WITH THE FLAWS AS POINTED OUT IN ITS BOOKS OF ACCOUNT IT CAME FORWARD TO FURNISH A REVISED RETURN BUT FOR TH E THOROUGH AND METICULOUS VERIFICATION OF BOOKS VOUCHERS ETC. TH E ASSESSEE WOULD NOT HAVE FILED A REVISED RETURN. THE SUSTAINED EFFORTS OF THE AO HAD CULMINATED IN ADMITTING ADDITIONAL INCOME TO THE TUNE OF RS.72 LAKHS WHICH HAS BEEN JUDICIOUSLY CONFIRMED BY THE LD. CIT (A). IT WAS THEREFORE PLEADED THAT THE IMPUGNED ORDER OF THE CIT(A) REQUIRES TO BE CON FIRMED. 6. WE HAVE DULY CONSIDERED THE RIVAL SUBMISS IONS ATTENTIVELY PERUSED THE RELEVANT RECORDS AND ALSO THE CASE LAWS IN WHIC H THE RESPECTIVE PARTIES HAVE PLACED THEIR STRONG RELIANCE. 6.1. ON A CLOSE PERUSAL OF THE ASSESSMENT ORDE R WE FIND THAT THE ASSESSMENT UNDER DISPUTE WAS TAKEN UP FOR SCRUTINY BY THE ADDL. CIT BY ISSUANCE OF NOTICE U/S 143(2)/142(1) OF THE ACT AND THE CASE WAS TAKEN UP FOR CONSIDERATION ONLY ON 18.12.2008 WHICH COULD BE SEEN FROM THE ASSESSMENT ORDER [DATES OF HEARING: 18 TH 19 TH 22 ND 23 RD 24 TH 26 TH AND 29 TH OF DECEMBER 2008]. DURING THE COURSE OF PROCEEDI NGS I.E. ON 24.12.2008 THE ASSESSEE WAS REQUIRED TO FURNISH CE RTAIN DETAILS [SOURCE: PARA 3 OF ASSESSMENT ORDER] BY 26.12.2008 ITSELF WH ICH IMPLICITLY BELIES THE REVENUES CONTENTION THAT THE ASSESSEE WAS GIVEN SU FFICIENT OPPORTUNITY TO EXPLAIN THE DEFECTS SO POINTED OUT. IN THE MEANWHI LE THE ASSESSEE HAD FURNISHED A REVISED RETURN ON 30.12.2008 DECLARING A REVISED INCOME AT RS.1 31 11 000/- WHICH INCLUSIVE OF RS.11.80 LAKHS TOWARDS BAD DEBTS WRITTEN OFF AND RS.60.20 LAKHS IN RESPECT OF THE AS SESSEES EARLIER CLAIM OF DISCOUNT ETC. ASTONISHINGLY THE VERY NEXT DAY I .E. ON 31.12.2008 THE AO ITA NO.501/BANG/10 PAGE 10 OF 15 CONCLUDED THE ASSESSMENT ACCEPTING THE REVISED INCO ME. SUBSEQUENTLY HE HAD ALSO INITIATED PENAL PROCEEDINGS U/S 271(1)( C) OF THE ACT ACCORDING TO HIM THE ASSESSEE HAD TRIED TO CONCEAL ITS PARTI CULARS OF INCOME ETC. 6.2. AS COULD BE SEEN FROM THE PERUSAL OF THE AS SESSMENT ORDER THAT THE ASSESSEE WAS ASKED TO FURNISH THE REQUIRED PARTICUL ARS PRECISELY ON 24.12.2008 WHEN THE AO PURPORTED TO HAVE VERIFIED T HE BOOKS OF ACCOUNT AND NOTICED CERTAIN CLAIMS REQUIRE CLARIFICATION/CO MMENTS ETC. THOUGH THE ASSESSEE FURNISHED CERTAIN CLARIFICATIONS IN A HUFF SUBSEQUENTLY IT CAME UP WITH A REVISED RETURN ON 30.12.2008 OFFERING WHO PPING RS.72 LAKHS FOR TAXATION. THE AO BY ALLOWING THE ALLEGED DISCREPA NCIES/DEFECTS SO NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO TAKE A BACK SEAT WENT AHEAD WITH IN FINALIZING THE ASSESSMENT THE VERY NE XT DAY I.E. ON 31.12.2008 ASSESSING THE TOTAL INCOME OF THE ASSES SEE AS PER REVISED RETURN. THE SEQUENCE OF EVENTS WHICH TOOK PLACE RAP IDLY ONE COULD SAFELY ASSUME THAT THIS WAS NOTHING BUT A MARRIAGE OF CONV ENIENCE RATHER THAN THE REVENUES CLAIM IN THE PENALTY PROCEEDINGS THAT BUT FOR THE THOROUGH AND METICULOUS VERIFICATION OF BOOKS OF ACCOUNT AND VOU CHERS ETC. THE ASSESSEE WOULD NOT HAVE FILED A REVISED RETURN . 6.3. AS A MATTER OF FACT THE ASSESSMENT PROCEEDI NGS HAVE BEEN INITIATED AT THE FAG END OF THE PERIOD AND THE AO HAD PERHAP S RUSHED THROUGH THE ASSESSMENT PROCEEDINGS LESS THAN A FORTNIGHT WHICH CULMINATED IN NOT AFFORDING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PROVE ITS METTLE. WHEN THE ASSESSEE HAS BEEN DEPRIVED OF NOT GIVING PROPER AND SUFFICIENT OPPORTUNITY TO SUBSTANTIATE ITS CLAIM NATURALLY TH E BLAME SHOULD BE PLACED ONLY AT THE DOORSTEP OF THE REVENUE WHO HAD NOT HON OURED THE NATURAL JUSTICE GUARANTEED TO A COMMON MAN. ITA NO.501/BANG/10 PAGE 11 OF 15 6.4. TURNING TO THE OBSERVATION OF THE LD.CIT(A) WE ARE NOT IN AGREEMENT WITH HIS VERSION THAT THE ASSESSEE HAD CONCEALED A ND FURNISHED INACCURATE PARTICULARS AS REGARDS THE TRADE DISCOUNT AND BAD D EBTS BY ADHERING TO THE COLORABLE DEVISE WITH THE MOTIVE TO REDUCE THE TAXA BLE PROFITS. AT THIS JUNCTURE WE RECALL THE ASSESSEES ASSERTION DURING THE HEARING BEFORE THIS BENCH THAT THE ASSESSEES ASSESSMENTS FOR THE AYS 2002-03 2003-04 AND 2004-05 HAVE ALL BEEN THE SUBJECT MATTER OF SCRUTIN Y AND THE METHODOLOGY OF GIVING DISCOUNT AND WRITING OFF BAD DEBTS WERE ACCE PTED BY THE REVENUE AND ALLOWED ITS CLAIM IN TOTO. THE DISCOUNTS EXTENDED TO THE FARMERS TO THE EXTENT OF RS.23.40 LAKHS RS.82.25 LAKHS RS.1.16 CRORES A ND RS.1.58 CRORES FOR THE AYS 2002-03 2003-04 2004-05 AND 2006-07 RESPECTIV ELY WERE COMMENSURATE WITH THE INCREASE IN THE SALES TURNOVE R AS WELL AS DUE TO THE INCREASE IN THE PRICE OF TRACTORS AND THESE VERY FA CTS HAVE BEEN ACCEPTED BY THE REVENUE AND THE METHODOLOGY OF ACCOUNTING FOR D ISCOUNT ADOPTED BY THE ASSESSEE WAS NOT PUT UNDER THE SCANNER ETC. 6.5. TO SUBSTANTIATE ITS VERACITY THIS BENCH WAS FACILITATED WITH THE COPIES OF THE RELEVANT ASSESSMENT ORDERS. ON A CLOSE PERU SAL OF THE ASSESSMENT ORDERS DISCOUNTS ON SALE OF VEHICLES OF RS.82 25 0 03/- AND RS. 1 16 02 207/- CLAIMED FOR THE AYS 2004-05 AND 2005 -06 RESPECTIVELY WERE ACCEPTED BY THE REVENUE AND CONCLUDED THE ASSESSMEN TS ACCORDINGLY [SOURCE: P & L ACCOUNT FOR THE YEARS ENDED 31.3.20 04 & 31.3.2005 PB AR]. THIS VERY FACT TO PUT IT GENTLY BELIES THE LD. CIT(A)S ASSERTION THAT THE APPELLANT HAS CONCEALED AND FURNISHED INACCURAT E PARTICULARS AS ITA NO.501/BANG/10 PAGE 12 OF 15 REGARDS THE TRADE DISCOUNT AND BAD DEBTS BY ADHERIN G TO THE COLOURABLE DEVISE WITH THE MOTIVE TO REDUCE THE TAX ABLE PROFITS . 6.6. TO PUT TO THE RECORDS STRAIGHT WE WOULD LIK E TO MAKE IT VERY CLEAR THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE ME THODOLOGY IN GIVING DISCOUNT TO THE FARMERS WHICH HAVE BEEN RECOGNIZED AND ACCEPTED BY THE REVENUE IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS CITED SUPRA. FOR THE ASSESSMENT YEAR UNDER DISPUTE THE AO PERHAPS TOOK A DIFFERENT VIEW ON THE SAME SET OF FACTS WHICH IN AN Y STRETCH OF IMAGINATION COULD NOT BE CATEGORIZED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. 6.7. TURNING TO THE REVISED RETURN FURNISHED BY T HE ASSESSEE WE FIND THAT THE AO HAD INSTANTLY ACCEPTED THE SAME WITHOUT ANY ADDITION OR DISALLOWANCE WHICH GOES TO PROVE THAT THERE WAS NEI THER ANY CONCEALMENT OF PARTICULARS OF ITS INCOME OR FURNISHING OF INACC URATE PARTICULARS OF SUCH INCOME. 6.8. DURING THE COURSE OF HEARING THE ASSESSEE CAME UP WITH A NUMBER OF PRONOUNCEMENTS OF VARIOUS JUDICIARY NOTABLY TH E RECENT VERDICT OF THE HIGHEST JUDICIARY OF THE LAND IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN [2010] 322 ITR 158 WHEREIN THE HONBLE COURT HAS OBSERVED THUS A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT TH ERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICU LARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTI ON 271(1) (C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO IN FORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS . IN ORDER TO EXPOSE ITA NO.501/BANG/10 PAGE 13 OF 15 THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTL Y COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING (SIC) MAKE AN INCORRECT CLAI M TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FU RNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS A RE FOUND TO BE INACCURATE THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE NOT EX ACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETA ILS SUPPLIED BY THE ASSESSEE IN ITS RETURN FOUND TO BE INCORRECT OR ERR ONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE R ETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 6.9. THE HONBLE ITAT PUNE IN THE CASE OF KANBAY SOFTWARE INDIA (P) LTD. V. DCIT REPORTED IN (2009) 122 TTJ 721 WAS OF THE FIRM VIEW THAT ..FOR CONCEALMENT OF PENALTIES UNDER SECTION 27 1(1)(C) THERE IS A COMPLETE CODE FOR SUCH PENALTY UNDER EXPLANATION TO THE SAID SECTION WHICH PRESUME CONCEALMENT WHEREVER THERE IS A DIFFERENCE BETWEEN REPORTED AND ASSESSED INCOME BUT WOULD AUTHORIZE LEVY OF PENALTY ONLY WHERE THE EXPLANATION IS NOT BONA-FIDE AND ALL THE MATERIALS TO THE COMPUTATION OF HIS TOTAL INCOME HAS BEEN DISCLOSED BY HIM 6.10. IN AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AND ALSO IN CONFORMITY WITH THE OBSERVATIONS OF THE HONBLE SUPREME COURT (CITED SUPRA) THAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) . WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OF FICER WAS NOT JUSTIFIED IN ITA NO.501/BANG/10 PAGE 14 OF 15 INITIATION AND LEVY OF PENALTY U/S 271 (1)(C) OF TH E ACT. FURTHERMORE THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE METHOD OLOGY IN GIVING DISCOUNT TO THE FARMERS AND WRITING OFF BAD DEBTS W HICH HAVE BEEN RECOGNIZED AND ACCEPTED BY THE REVENUE IN THE ASSES SEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS CITED SUPRA. THEREFOR E THE AO WAS NOT JUSTIFIED IN FORMING A DIFFERENT VIEW THAT THE ASSE SSEE HAD CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E ON THE BASIS OF WHICH HE HAD INITIATED PENALTY PROCEEDINGS FOR ALLEGED CO NCEALMENT OF PARTICULARS OF ITS INCOME OR FURNISHING OF INACCURATE PARTICULA RS 6.11. IN A NUT-SHELL THE AO WAS NOT JUSTIFIED IN IMPOSIN G PENALTY U/S 271(1) (C) OF THE ACT. IT IS ORDERED ACCORDINGLY. 7. BEFORE PARTING WITH THE CASE WE WOULD LIKE TO RECORD THAT ACCORDING TO THE ASSESSEE THOUGH THERE WAS NEITHER INFLATION OF EXPENSES NOR CONCEALMENT OF INCOME AND WITHOUT PREJUDICE TO ITS RIGHTS NONETHELESS REVISED ITS INCOME VOLUNTARILY OFFERING ADDITIONAL INCOME ONLY WITH A VIEW TO BUY PEACE WITH THE DEPARTMENT AND THAT THE ASSESSME NT SO CONCLUDED ON THE BASIS OF SUCH REVISED INCOME WHICH WAS NOT CHA LLENGED BY THE ASSESSEE THIS BENCH HAD NOT GONE TO THE VERACITY O R OTHERWISE OF THE CONCLUSION OF THE ASSESSMENT ON THE REVISED INCOME OFFERED BY THE ASSESSEE. THIS BENCHS ROLE WAS CONFINED TO THE EX TENT THAT - WHETHER THE AO WAS WITHIN HIS REALM TO INITIATE THE PENAL PROCE EDINGS ON THE BASIS OF METHODOLOGY OF GIVING DISCOUNT AND WRITING OFF BAD DEBTS ADOPTED BY THE ASSESSEE OR OTHERWISE? ITA NO.501/BANG/10 PAGE 15 OF 15 7. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF AUGUST 2010. SD/- SD/- ( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 10 TH AUGUST 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.