Jankar Shroffin Pvt.Ltd,, Surat v. The Income tax Officer,Ward-1(3),, Surat

ITA 623/AHD/2007 | 2001-2002
Pronouncement Date: 31-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 62320514 RSA 2007
Assessee PAN AAACJ6022G
Bench Ahmedabad
Appeal Number ITA 623/AHD/2007
Duration Of Justice 4 year(s) 1 month(s) 21 day(s)
Appellant Jankar Shroffin Pvt.Ltd,, Surat
Respondent The Income tax Officer,Ward-1(3),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-03-2011
Date Of Final Hearing 08-10-2010
Next Hearing Date 08-10-2010
Assessment Year 2001-2002
Appeal Filed On 09-02-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT JUDICIAL MEMBER AND SHRI D.C. AGRAWAL ACCOUNTANT MEMBER DATE OF HEARING : 09/06/2010 DRAFTED ON: 2 9/06/2010 ITA NO.623/AHD/2007 ASSESSMENT YEAR : 2001-02 JANKAR SHROFFIN PVT.LTD. 5/1334-B KALJUG STREET BHAVNIWAD HARIPURA SURAT 395 003 VS. THE ITO WARD-1(3) SURAT PAN/GIR NO. : AAACJ 6022 G (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI J.P.SHAH RESPONDENT BY: SHRI K.MADHUSUDAN SR. D.R. O R D E R PER SHRI MUKUL SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -I SURAT DATED 01/12/2006 IN RESPECT OF LEVY OF PENALTY OF RS.12 61 087/- U/S271(1)(C) OF THE ACT. 2. SEVERAL GROUNDS HAVE BEEN RAISED THROUGH WHICH I T WAS AGITATED THAT THE REASONS FOR LEVY OF PENALTY WAS NOT AS PER LAW; FOR READY REFERENCE RELEVANT PORTIONS ARE REPRODUCED BELOW:- 1) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACT SIN CONFIRMING THE LEVYING OF PENAL TY U/S.271(1)(C) OF THE ACT IN RESPECT OF ADDITION OF ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 2 - RS.8 85 000/- MADE ON THE GROUND OF UNEXPLAINED CAS H FOUND DURING SURVEY. 2) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN CONFIRMING THE LEVYING OF PENAL TY U/S.271(1)(C) OF THE ACT IN RESPECT OF ADDITION OF RS.4 13 500/- MADE ON THE GROUND OF UNEXPLAINED CAS H FOUND DURING SURVEY. 3) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE LEVYING OF PENAL TY U/S.271(1)(C) OF THE ACT IN RESPECT OF ADDITION OF RS.21 25 088/- MADE ON THE GROUND OF UNEXPLAINED CA SH CREDITORS. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING PE NALTY ORDER PASSED U/S. 271(1)(C) OF THE I.T.ACT 1961 DATED 03 /03/2006 AND THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT 1961 DATED 17/03/2004 FOR ASSESSMENT YEAR 2001-02 WERE THAT THE ASSESSEE- COMPANY IS STATED TO BE IN THE BUSINESS OF DISCOUNTING OF CHEQUES AND DRAFTS ON COMMISSION BAS IS. THE ASSESSEE WAS SUBJECTED TO SURVEY U/S.133A OF THE I. T. ACT 1961 ON 17/10/2000. TWO BUSINESS PREMISES WERE UNDER SU RVEY OPERATION BY THE REVENUE DEPARTMENT. THERE ARE THREE REASONS FOR INVOCATION OF THE CONCEALMENT PROCEEDINGS. 3.1) FIRST REASON FOR LEVY OF PENALTY WAS AN AMOUNT OF RS.8 85 000/- FOUND AS CASH AT THE BUSINESS PREMISES OF THE COMPANY. IT WAS EXPLAINED BY ONE OF THE DIRECTORS AS PER HIS STATEMENT RECORDED ON 17/01/2000 THAT SINCE THE COM PANY HAPPENED TO BE RUNNING THE BUSINESS OF DISCOUNTING OF CHEQUES/D RAFTS THEREFORE CASH IS NEEDED AT THE BUSINESS PREMISES. IT WAS FU RTHER EXPLAINED THAT THE COMMISSION WAS CHARGED @ OF 12 PAISE PER HUNDRE D RUPEES ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 3 - INCLUDING BANK COMMISSION. SOMETIMES IN CASE OF EMERGENCY THE COMMISSION IS CHARGED FROM 22 TO 25 PAISE PER HUNDR ED RUPEES IF THE PAYMENT WAS TO BE MADE INSTANTLY ON THE SAME DAY. IT HAS ALSO BEEN INFORMED THAT THE MAXIMUM TRANSACTIONS WERE WITH TH E KNOWN PERSONS OR KNOWN PARTIES. IT HAS ALSO BEEN EXPLAINED THAT WHEN A PARTY IS NOT KNOWN THEN THE ASSESSEE-COMPANY USED TO PREPARE A KACHHA CHIT NOTING THE NAME OF THE PARTY AND THE AMOUNT HANDED OVER TO THE SAID PARTY. WHENEVER THE SAID PARTY COMES BACK WITH THE KACHHA CHIT THAT CHIT IS RECEIVED BACK AND DESTROYED. THE PAYMENT I S ACCORDINGLY HANDED OVER TO THE SAID PARTY. IT WAS ALSO STATED THAT THE ASSESSEE HAD MAINTAINED THE BOOKS OF ACCOUNT. APART FROM THE TO TAL CASH OF RS.12 70 000/- FOUND FROM THE BUSINESS PREMISES BE SIDES THAT THERE WAS A CASH BALANCE AS PER THE BOOKS OF RS.8 41 079/ - WHICH WAS PAID ON THE DATE OF SURVEY I.E. ON 17/10/2000 TO THREE PARTIES AGAINST THE RECEIPT OF CHEQUES/DRAFTS. THE NAMES AND THE AMOU NT WAS AS UNDER:- SR.NO. NAME AMOUNT (RS.) 1. SHANKARDAS DESAI 426 520 2. HARI TEXTILES 157 819 3. GANESH STEEL INDUSTRIES 256 740 TOTAL 841 079 3.1. THE SAME WAS HELD AS UNEXPLAINED AMOUNT AND TA XED U/S.69 OF THE I.T. ACT 1961. IT HAS ALSO BEEN INFORMED THAT THE IMPUGNED AMOUNT WAS AFFIRMED IN FIRST APPEAL. IN THE QUANTUM APPEAL WHEN THE MATTER HAS REACHED TO THE ITAT D BENCH (BY WAY OF ITA NO.283 0/AHD/2004 FOR ASSESSMENT YEAR 2001-02) RELIEF TO THE EXTENT O F RS.8 41 079/- WAS GRANTED VIDE ITS ORDER DATED 14/05/2010 BY SETTING ASIDE THE ISSUE TO ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 4 - THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO NS FOR CERTAIN CLARIFICATIONS HOWEVER THE BALANCE AMOUNT OF RS.4 3 922/- WAS AFFIRMED. FOR READY REFERENCE RELEVANT PARAGRAPH NO.4 IS R EPRODUCED BELOW:- 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DISCOUNTING OF DRAFTS/CH EQUES ON COMMISSION BASIS. A SURVEY UNDER SECTION 133A OF T HE ACT WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 17.10.2000 . DURING THE COURSE OF THE SURVEY EXCESS CASH OF RS.8 85 001/- W AS FOUND WHICH WAS ADDED BY THE LEARNED ASSESSING OFFICER UNDER SE CTION 69 OF THE ACT TREATING AS UNEXPLAINED MONEY OF THE ASSESS EE. THE ABOVE ADDITION WAS ALSO CONFIRMED BY THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS). WE FIND THAT THE ASSESSEE ALL ALONG DURING THE COURSE OF THE SURVEY DURING THE ASSESSMENT PRO CEEDINGS BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) AND BEFORE US ALSO CONSISTENTLY EXPLAINED THAT OUT OF R S.8 85 001/- RS.841079/- WAS THE AMOUNT PAYABLE BY THE ASSESSEE TO THREE PERSONS AGAINST CHEQUE DISCOUNTING WHICH WAS THOUGH SHOWN AS PAYMENT IN HIS CASH BOOK AS THE MONEY WAS TAKEN OUT OF CASH BOX BUT IT WAS NOT ACTUALLY HANDED OVER. WE FIND THAT T HE LOWER AUTHORITIES HAVE NOT DISPUTED THE CONTENTION OF THE ASSESSEE TO THE EFFECT THAT ON THE DATE OF THE SURVEY PAYMENTS OF R S.8 41 079/- TO THREE DIFFERENT PERSONS WERE ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HOWEVER THE LEARNED ASSESSING OFFICER HA S NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE ON THE GRO UND THAT THE ASSESSEE COULD NOT SUBSTANTIATE HIS EXPLANATION BY FILING CONFIRMATIONS FROM THE SAID PARTIES. THE LEARNED AS SESSING OFFICER ALSO OPINED THAT IDENTITIES OF SAID THREE PARTIES W ERE NOT ESTABLISHED BEFORE HIM AND THE SAID THREE PARTIES WERE NOT PRODUCED BEFORE HIM FOR HIS EXAMINATION. ON THE OT HER HAND THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE P OINTED OUT THAT THE ASSESSEE VIDE ITS LETTER DATED 26.02.2004 (PAGE S 63-64 OF THE PAPER BOOK) FILED BEFORE THE LEARNED ASSESSING OFFI CER HAS REQUIRED THE LEARNED ASSESSING OFFICER TO VERIFY TH E FACT OF DEPOSIT ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 5 - OF CHEQUES FROM THE BANK DIRECTLY AS THE BANK WAS N OT GIVING COPY OF CHEQUES TO THE ASSESSEE AND HE HAS NO LEGAL AUTH ORITY TO COMPEL THE BANK TO GIVE COPY OF CHEQUES OR DRAFT AND ALSO REQUESTED THE LEARNED ASSESSING OFFICER TO EXERCISE POWERS AVAILA BLE WITH HIM UNDER THE ACT TO VERIFY THE STATEMENT OF THE ASSESS EE. HE ALSO POINTED OUT THAT INSPITE OF THIS REQUEST BY THE ASS ESSEE THE LEARNED ASSESSING OFFICER HAS NOT EXERCISED ANY POWER AVAIL ABLE WITH HIM TO VERIFY THE GENUINENESS OR OTHERWISE OF THE EXPLA NATION OF THE ASSESSEE AND REJECTED THE EXPLANATION OF THE ASSESS EE BY MERELY TAKING THE BENEFIT OF THE SITUATION WHERE THE ASSES SEE WAS NOT IN A POSITION TO LEAD THE EVIDENCES TO SUBSTANTIATE HIS EXPLANATION AS THE EVIDENCES WERE NOT IN THE POSSESSION OF THE ASSESSE E. IN RESPECT OF BALANCE AMOUNT OF RS.43 922/- WHICH WAS FOUND EXCES S DURING THE COURSE OF THE SURVEY THE LEARNED AUTHORISED RE PRESENTATIVE OF THE ASSESSEE ADMITTED THAT ADDITION TO THAT EXTENT WAS JUSTIFIED. IN THE ABOVE FACTS AND CIRCUMSTANCES IN OUR CONSIDERE D VIEW THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN MAKING THE ADDITION BY REJECTING THE EXPLANATION OF THE ASSESSEE WITHOUT M AKING ANY ATTEMPT TO VERIFY THE GENUINENESS OF THE EXPLANATIO N EITHER FROM THE BANK OR FROM THE THREE PARTIES DIRECTLY. IN OUR CON SIDERED OPINION POWER UNDER SECTION 133(6) AND 131 ARE MADE AVAILAB LE BY THE ACT WITH THE INCOME TAX AUTHORITIES WITH A VIEW THAT TH E SAME SHALL BE EXERCISED BY THEM TO RENDER JUSTICE WHEN THE SITUAT ION SO WARRANTS. THEREFORE IN OUR CONSIDERED OPINION THE LOWER AUTH ORITIES WERE NOT JUSTIFIED IN CONFIRMING THE ADDITION WITHOUT EX ERCISING THOSE POWERS. THEREFORE IT SHALL BE JUST AND FAIR AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE ADDITION OF RS.8 41 079/- BACK TO TH E FILE OF THE LEARNED ASSESSING OFFICER FOR PROPER VERIFICATION OF THE EXPLANATION OF THE ASSESSEE BY EXCISING THE POWER A VAILABLE UNDER THE ACT WITH HIM AND THEREAFTER PASSING THE ORDER A FRESH IN ACCORDANCE WITH THE LAW AND AFTER ALLOWING REASONAB LE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE ORDER AC CORDINGLY IN RESPECT OF BALANCE AMOUNT OF RS.43 922/- THE ORDER S OF THE LOWER AUTHORITIES ARE CONFIRMED. THUS THE GROUND OF APPE AL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 4. ON HEARING THE RIVAL SUBMISSIONS AS WELL AS ON PERUSING THE RELEVANT ORDERS ONCE THE ADMITTED POSITION IS THAT OUT OF THE TOTAL ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 6 - DISALLOWANCES THE ABOVE DISCUSSED ADDITION WAS ONE OF THE GROUND FOR LEVY OF THE PENALTY AND PART OF THE SAME HAS BEEN RESTORED BACK FOR RE- ADJUDICATION THEREFORE AT PRESENT IT IS NOT JUDIC IOUS ON OUR PART TO AFFIRM THE CONCEALMENT PENALTY. IT IS PRE-MATURE AND UND ESIRABLE TO TREAT AN AMOUNT AS CONCEALED AMOUNT WHICH HAS NOT YET BEEN FULLY ESTABLISHED AS AN UNEXPLAINED INVESTMENT U/S.69 OF THE I.T. ACT 1 961 IN THE HANDS OF THE ASSESSEE. WITH THE RESULT THE LEVY OF PENALTY TO THIS EXTEN T IS DIRECTED TO BE REDUCED. BEFORE WE PART WITH THIS PART OF THIS GROUND WE MA Y LIKE TO CLARIFY THAT THE RESPECTED CO-ORDINATE BENCH HAS AFFIRMED THE ADDITION OF RS.43 922/- THEREFORE THE PENALTY TO THE SAID EXTENT IS HEREBY SUSTAINED. 5. THE SECOND REASON FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT 1961 IS (AS PER GROUND NO.2) WAS IN RESPECT OF UNEXPLAINED CASH OF RS.4 13 500/-. RECORDS OF THE CASE HAVE DEMONSTRATED THAT A CASH FROM ASSESSEES PREMISES WAS FOUND. THE EXPLANATION AS STATED DURING THE COURSE OF STATEMENT RECORDED AT THE TIME OF SURVEY WAS THAT THE SOURCE OF THE SAID CASH WAS ENCASHMENT OF FDRS PERTAINING TO ONE INDIVIDUAL. IT HAS ALSO BEEN EXPLAINED IN THE SAID STATEMENT THAT THOSE FDRS WERE DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE SAID I NDIVIDUAL. REVENUE AUTHORITIES WERE NOT CONVINCED WITH THE SAID EXPLAN ATION AND THE FIRST APPELLATE AUTHORITY HAS UPHELD THE ADDITION THEREF ORE THE ISSUE WAS CARRIED BEFORE THE TRIBUNAL AND VIDE PARAGRAPH NO.7 OF THE ABOVE REPORTED DECISION DATED 14/05/2010( SUPRA) THE IMPUGNED ADDITION WAS DELETED AND THE SAME READS AS UNDER:- ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 7 - 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT CASH OF RS.4 13 500/- WAS FOUND DURING THE SUR VEY AT BHAVANIVAD PREMISES OF THE ASSESSEE. DURING THE COU RSE OF THE SURVEY ITSELF SHRI ARVINDBHAI I. SHROFF DIRECTOR OF THE ASSESSEE COMPANY EXPLAINED THAT THE SAID CASH BELONG TO HIM IN HIS INDIVIDUAL CAPACITY AND WAS OUT OF MATURITY PROCEED S OF FIXED DEPOSITS WHICH WAS FULLY DISCLOSED IN HIS INDIVIDU AL BALANCE SHEET. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS TH E LEARNED ASSESSING OFFICER OBSERVED THAT CASH OF RS.9 10 000 /- WAS WITHDRAWN FROM THE PERSONAL ACCOUNT OF SHRI ARVINDB HAI I. SHROFF BUT THE SAID WITHDRAWAL WAS ON 11.09.2000 I..E. 35 DAYS BEFORE THE DATE OF THE SURVEY. ACCORDING TO THE LEARNED ASSESS ING OFFICER THE ASSESSEE COULD NOT BRING ANY MATERIAL TO SHOW THAT THE CASH FOUND DURING THE SURVEY WAS OUT OF THAT CASH WHICH WAS WI THDRAWN 35 DAYS EARLIER. THEREFORE HE MADE THE ADDITION OF R S.4 13 500/- TO THE INCOME OF THE ASSESSEE BY TREATING IT AS UNEXPL AINED CASH OF THE ASSESSEE. THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) ALSO CONFIRMED THE ABOVE ACTION OF THE LEARNED ASSESSING OFFICER FOR THE SAME REASONS. WE FIND THAT SHRI ARVINDBHAI I. S HROFF DIRECTOR OF THE ASSESSEE COMPANY DURING THE COURSE OF SURVEY ITSELF CLAIMED THAT THE CASH OF RS.4 13 500/- BELONG TO HIM IN HIS INDIVIDUAL CAPACITY. TO ESTABLISH THE SAME THE ASSESSEE ALSO PRODUCED MATERIAL BEFORE THE LEARNED ASSESSING OFFICER TO SH OW THAT RS.9 10 000/- WAS WITHDRAWN BY SAID SHRI ARVINDBHAI I. SHROFF FROM HIS BANK ACCOUNT ON 11.09.2000. IN OUR CONSID ERED VIEW THE INITIAL ONUS WHICH WAS ON THE ASSESSEE WAS THUS DUL Y DISCHARGED BY THE ASSESSEE. NOW IT WAS UPON THE REVENUE TO BRING COGENT MATERIAL ON RECORD TO SHOW THAT WHY THIS RS.4 13 500/- COULD NOT BE AVAILABLE ON 17.10.2000 OUT OF THE CASH WITHDRAWN F ROM THE BANK ACCOUNT OF SHRI ARVINDBHAI I. SHROFF OF RS.9 10 000 /- ON 11.09.2000. WE FIND THAT THE REVENUE COULD NOT BRI NG ANY MATERIAL ON RECORD TO DISCHARGE THE ABOVE BURDEN WHICH WAS ON IT. THUS IN OUR CONSIDERED OPINION THE ADDITION WAS MADE ON A WRONG FOOTING AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE SAME. WE THEREFORE DELETE THE ADDITION OF RS.4 13 500/- AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 8 - 6. ON HEARING THE RIVAL SUBMISSIONS AND IN THE LIGH T OF THE ABOVE REPRODUCED PARAGRAPH NO.7 OF THE TRIBUNALS ORDER ONCE THE QUANTUM ADDITION STOOD DELETED BY THE RESPECTED CO-ORDINATE BENCH D AND THE EXPLANATION OF THE ASSESSEE ABOUT THE SOURCE OF THE SAID CASH WAS FOUND SATISFACTORY THEREFORE THERE IS NO REASON TO IMPO SE CONCEALMENT PENALTY TO THE EXTENT OF THE SAID AMOUNT. WE HEREBY DIRECT NOT TO IMPOSE THE PENALTY OF CONCEALMENT IN RESPECT OF THE SAID AMOUN T. 7. THE LAST AND THE THIRD REASON FOR IMPOSITION OF PENALTY U/S.271(1)(C) OF THE I.T. ACT 1961 WAS (AS PER GRO UND NO.3) IN RESPECT OF AN ADDITION OF RS.21 25 088/-. 8. FACTS IN BRIEF AS CULLED OUT FROM THE IMPUGNED A SSESSMENT ORDER DATED 17/03/2004( A.Y. 2001-02) WERE THAT A QUESTIO N WAS RAISED IN RESPECT OF FOLLOWING 15 TRADERS:- SR.NO. 1. NARENDRAKUMAR 109 899 2. SURAJ TEX 250 000 3. AMIT N.THAKKAR & CO. 12 600 4. MANOJ JAIN 99 127 5. JATINBHAI 2 000 6. HITESH 6 763 7. SHIVA 512 069 8. RANNA THAKKAR & CO. 3 150 9. SUNU TEXTILE 294 500 ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 9 - 10. SOMU TEXTILES 295 500 11. MAHALAXMI 300 000 12. MAHESH 20 000 13. ICONE FAB 25 000 14. SAI TEXTILES 9 970 15. MAHALAXMI ENTERPRISE 200 000 TOTAL 2 140 838 9. IT IS INTERESTING TO NOTE AT THE OUTSET THAT THE ASSESSING OFFICER HAS REMARKED THAT THE ASSESSEE-COMPANY HAD CREDITED ITS ACCOUNT WITH VARIOUS ALLEGED TO BE IN FICTITIOUS NAMES . ON ACCOUNT OF THE SAID ALLEGATION IT WAS ASKED TO FURNISH NAMES ADDRESSE S CONFIRMATION WITH EVIDENCE IDENTITY OF THE PERSONS GENUINENESS OF T RANSACTION ALONG WITH THEIR CREDITWORTHINESS. SINCE THE COMPLIANCE WAS N OT PROPER HENCE THE ASSESSING OFFICER HAS ALSO REMARKED THAT THE COMPLE TE BOOKS OF ACCOUNT COULD NOT BE PRODUCED BY THE ASSESSEE. RATHER IT WAS TOLD TO THE ASSESSING OFFICER THAT AS FAR AS THE FURNISHING OF ADDRESSES OF THOSE CREDITORS WAS CONCERNED THE ASSESSEE-COMPANY HAD N OT MAINTAINED SUCH DETAILS DUE TO THE PECULIAR NATURE OF THE BUSINESS. THE ASSESSING OFFICER HAS THUS CONCLUDED THAT THE ASSESSEE HAD FAILED T O SUBSTANTIATE THE GENUINENESS OF THE CREDITORS BY FURNISHING COGENT E VIDENCE. HOWEVER THE RESPONSE OF THE ASSESSEE WAS THAT ITS BUSINESS BEING A DISCOUNTING AGENT HENCE CONDUCTING ITS BUSINESS AS A SHROFF. IT WAS EXPLAINED THAT WHEN A SELLER OF THE GOODS RECEIVES A CROSSED CHEQU E OR DRAFT THE SAME WAS ENDORSED BY THE PURCHASER AND WHEN THE PURCHASE RS FIND IT NECESSARY TO ENCASH SUCH CHEQUE OR DRAFT FOR THE PURPOSE OF MAKING PAYMENT TO THE ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 10 - SELLER THEY APPROACH THE ASSESSEE WITH THE REQUES T TO MAKE THE PAYMENT IN CASH AGAINST THE SAID CHEQUE OR DRAFT. FURTHER EXPLAINING THE NATURE OF THE BUSINESS IT WAS INFORMED THAT IN THE CAPACITY OF A DISCOUNTING AGENT THE ASSESSEE USED TO ACCEPT THOSE CHEQUES. THOSE CH EQUES ARE THEN DEPOSITED IN THE ASSESSEES BANK. AFTER RETAININ G THE DISCOUNTING COMMISSION THE BALANCE AMOUNT IS USED TO BE PAID I N CASH. IT WAS EITHER PAID TO THE SELLER OR TRADER WHO HAD RECEIVED THE C HEQUE FROM THE PURCHASER OR THE AMOUNT IS USED TO BE PAID TO A PUR CHASER WHO INTENDS TO ENCASH THE SAID CHEQUE OR DRAFT. IT IS WORTH TO M ENTION THAT IN RESPECT OF CROSSED CHEQUES THE ASSESSEE HAS EXPLAINED THAT WHI LE ACCEPTING THE CROSSED CHEQUES THE PAYMENTS IN CASH WERE NOT MADE IMMEDIATELY BUT IN THOSE CASES THE PAYMENTS USED TO BE MADE AFTER THE CHEQUE GOT CLEARED VIDE NORMAL BANKING CHANNEL. INTER-ALIA IT WAS EXP LAINED THAT THE ASSESSEE PURCHASES THE CHEQUES OR DRAFTS FOR A LESS ER AMOUNT THEN THE DENOMINATION OF THE CHEQUE/DRAFT AND THEREFORE TH E BALANCE AMOUNT IS OFFERED AS INCOME UNDER THE HEAD DISCOUNTING COMMISSION . IT WAS ALSO EXPLAINED THAT SINCE THE TRANSACTION IN EACH DAY IS VOLUMINOUS THEREFORE THE ASSESSEE USUALLY DO NOT RETAIN THE IDENTIFICATI ON OR THE ADDRESS OF SUCH CUSTOMERS. IT WAS FURTHER ELABORATED THAT SUCH A BUSINESS TRANSACTION WAS IN THE NATURE OF A CASH COUNTER OF A BUSINESS. ON AN AVERAGE DAILY ABOUT 50 PERSONS USED TO APPROACH THE ASSESSEE WITH THE REQUEST OF DISCOUNTING FACILITY. DUE TO THIS REASON CONSID ERING THE RUSH OF SUCH PERSONS WE DO NOT INSIST UPON NOTING THE NAMES AD DRESSES IDENTIFICATION AND CREDITWORTHINESS OF THOSE PERSONS BECAUSE WE WO ULD NOT HAVE BEEN ABLE TO COMPLETE THE TRANSACTION OF THE BUSINESS IN A DAYS TIME. THE ASSESSING OFFICER WAS NOT CONVINCED AND ELABORATED THAT THE ASSESSEE IS ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 11 - USED TO CHARGE COMMISSION OF 20 PAISE IF THE PAYMEN T IS BEING MADE ON THE SAME DAY. THE RATE OF COMMISSION IS 15 PAISE IF THE PAYMENT IS MADE ON THE NEXT DAY AND 10 PAISE IF THE PAYMENT IS MADE ON THE THIRD DAY. THE ASSESSING OFFICER WAS ALSO NOT CONVINCED THAT T HE IMPUGNED TRANSACTIONS WERE CONNECTED WITH THE BUSINESS CREDI TORS OF THE ASSESSEE. IT WAS FOUND BY THE ASSESSING OFFICER THAT GENERALL Y THE CREDITORS WERE PAID MONEY AFTER THE LAPSE OF 60 TO 75 DAYS ON RECE IVING THE CHEQUE/DRAFT. THE ASSESSING OFFICER HAD MADE A TABULATION-SHEET O F FEW PERSONS DEPICTING THE DATE OF RECEIPT OF THE AMOUNT ON ONE HAND AND THE DATE OF RE-PAYMENT OF THE AMOUNT ON THE OTHER HAND. IN TH E OPINION OF THE ASSESSING OFFICER NO PRUDENT BUSINESS MAN WOULD DE POSIT A CHEQUE FOR MORE THAN TWO MONTHS FOR THE DISCOUNTING PURPOSE AN D SUCH A PRACTICE WAS NOT PREVALENT. IT WAS ALSO COMMENTED BY THE AS SESSING OFFICER THAT WHEN THE MAXIMUM TRANSACTIONS WERE WITH THE KNOWN P ARTIES THEN HOW THE ASSESSEE HAS CONTENDED THAT HE WAS LEAST CONCER NED ABOUT THE IDENTITY OF THE CUSTOMERS. BASICALLY THE ASSESSING OFFI CER HAS DISCARDED ALL THE EXPLANATIONS OF THE ASSESSEE ON THE GROUND THAT THE PRIMARY ONUS IS ABOUT THE TRANSACTIONS WAS NOT DISCHARGED BY THE ASSESSEE . AFTER DISCUSSING FEW CASE LAWS THE ASSESSING OFFICER HAS TAXED THE AMOUNT BY INVOKING THE PROVISIONS OF THE SECTION 68 OF THE I. T. ACT 1961. WHEN THE MATTER WAS CARRIED TO THE FIRST APPELLATE AUTHO RITY THE ACTION OF THE ASSESSING OFFICER WAS AFFIRMED PRIMARILY ON THE GRO UND THAT THE ONUS WAS NOT DISCHARGED BY THE ASSESSEE THOUGH AMPLE OPP ORTUNITIES WERE GRANTED. IT WAS HELD BY THE LEARNED CIT(APPEALS) THAT IF THE ASSESSEE HAD CHOSEN NOT TO EXPLAIN THE CREDITWORTHINESS IDE NTITY ETC. OF ALL THOSE CREDITORS DESPITE SEVERAL OPPORTUNITIES THEN THE GR OUND RAISED BEFORE HIM ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 12 - DID NOT CARRY MUCH WEIGHT. THAT ORDER WAS CHALLENGE D BEFORE ITAT AND VIDE ORDER DATED 14.5.2010( SUPRA) THE VIEW TAKEN B Y LD. CIT(A) WAS AFFIRMED IN THE FOLLOWING MANNER :- 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. THE LEARNED ASSESSI NG OFFICER OBSERVED THAT RS.21 25 088/- WAS APPEARING AS CASH CREDIT IN THE BALANCE SHEET OF THE ASSESSEE IN THE NAME OF THE 13 DIFFERENT PARTIES. THE LEARNED ASSESSING OFFICER ASKED THE A SSESSEE TO EXPLAIN THE GENUINENESS OF THE CASH CREDIT BY FURNI SHING CONFIRMATION ADDRESS AND MATERIAL TO SHOW CREDIT W ORTHINESS OF THESE CREDITORS. HOWEVER THE ASSESSEE FAILED TO F URNISH THE DETAILS AS CALLED UPON AND THEREFORE THE LEARNED A SSESSING OFFICER TREATED THE SAME AS UNEXPLAINED INCOME OF T HE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT . ON APPEAL LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION OF RS.35 000/- RELATING TO THREE PARTIES A ND CONFIRMED THE ADDITION OF RS.20 90 088/- RELATING TO BALANCE 10 PARTIES. BEFORE US THE SOLE CONTENTION OF THE LEARNED AUTHO RISED REPRESENTATIVE OF THE ASSESSEE WAS THAT AS THE ASSE SSEE EARNS COMMISSION INCOME @ 12 PAISE TO 25 PAISA PER 100 RU PEES INCLUDING BANK COMMISSION THE LOWER AUTHORITIES WE RE NOT JUSTIFIED IN ADDING RS.20 90 088/- AS UNEXPLAINED C ASH CREDIT. WE FIND NO MERIT IN THE ABOVE ARGUMENT OF THE ASSES SEE. SECTION 68 OF THE ACT CLEARLY REQUIRES AN ASSESSEE TO ESTAB LISH THE NATURE AND SOURCE OF CASH CREDIT TO THE SATISFACTION OF TH E ASSESSING AUTHORITY AND IN ABSENCE OF WHICH THE LEARNED ASSES SING OFFICER ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 13 - HAS THE POWER TO TREAT THE UNEXPLAINED CASH CREDIT AS INCOME OF THE ASSESSEE. WE FIND THAT THE ASSESSEE HAS NOT D ISPUTED THE FACT THAT RS.20 90 088/- WHICH WAS ADDED BY THE REVENUE WAS NOT CASH CREDIT IN HIS BOOKS OF ACCOUNT. FURTHER BEFORE TH E LEARNED ASSESSING OFFICER THE ASSESSEE EXPLAINED THAT BECAU SE OF HIS NATURE OF BUSINESS WHEREIN CHEQUES WERE RECEIVED F ROM THE DIFFERENT PARTIES AND AFTER ENCASHING THE CHEQUES O R DRAFTS THE CASH WAS PAID TO THE PARTIES PROVIDING THE CHEQUES OR DRAFTS THE ASSESSEE WAS NOT REQUIRED TO MAINTAIN THE RECORD OF FULL ADDRESS AND IDENTITY OF THE CHEQUE OR DRAFT PROVIDER. THE ASSESSEE ALSO CONTENDED THAT IN VIEW OF THE LARGE VOLUME OF THE B USINESS IT WAS ALSO NOT PRACTICALLY POSSIBLE TO MAINTAIN FULL RECO RD OF ADDRESSES AND OTHER DETAILS OF THE PARTIES. IN OUR CONSIDER ED OPINION SUCH EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED IN V IEW OF THE SPECIFIC PROVISION OF LAW CONTAINED IN SECTION 68 O F THE ACT. IN OUR CONSIDERED OPINION WHEN THE ASSESSEE CLAIMS TO HAVE RECEIVED CHEQUE OR DRAFT ON CREDIT I.E. CASH IS NOT IMMEDIATELY GIVEN TO THE CHEQUE OR DRAFT PROVIDER THEN THE LAW REQUIRES THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF SUCH CRE DIT BY ESTABLISHING IDENTITY AND GENUINENESS OF THE TRANSA CTION. IN THE ABOVE CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THER EFORE THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9.1. SINCE THE QUANTUM WAS AFFIRMED THEREFORE THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT 1961 WER E ENFORCED. FACTS AS ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 14 - NARRATED ABOVE HAVE BEEN REITERATED. THE ASSESSING OFFICER HAS NOTED THAT ONCE THE AMOUNT WAS RE-PAID IN CASH AFTER 60 T O 75 DAYS OF DEPOSIT OF THE CHEQUE THEN IT WAS A CLEAR INDICATION THAT THE Y WERE NOT A BUSINESS CREDITOR BUT REPRESENTED THE INSTANCES OF UNVERIFIE D CREDITORS. AN ANOTHER IMPORTANT FEATURE HAVE ALSO BEEN NOTED BY T HE ASSESSING OFFICER THAT IN RESPECT OF THOSE 15 PARTIES THE ASSESSEE H AD NOT CHARGED ANY COMMISSION. ON ONE HAND THE CLAIM OF THE ASSESSEE WAS THAT HE HAD ENTERED INTO TRANSACTION ONLY WITH THE KNOW PARTIES HOWEVER ON THE OTHER HAND THE ASSESSEE HAS NOT FURNISHED THE DETAILS E TC. OF THOSE ALLEGED KNOWN PARTIES. ACCORDING TO ASSESSING OFFICER W HETHER THE AMOUNTS WERE CURRENT LIABILITIES OR SECURED/UNSECURED LOAN S HAD NO EFFECT AS FAR AS THE QUESTION OF DISCHARGING OF ONUS WAS CONCERNE D. MERELY BY CHANGING THE HEAD OF THE ACCOUNT IN THE BALANCE-SHE ET DID NOT ABSOLVE THE ASSESSEE OF ITS STATUTORY OBLIGATION OF PROVING THE GENUINENESS OF THE AMOUNT AS APPEARED IN THE BOOKS OF ACCOUNT. WITH T HESE REASONING THE LEVY OF PENALTY WAS AFFIRMED. 9.2. THE LEARNED AUTHORISED REPRESENTATIVE MR. J.P.SHAH OF THE ASSESSEE CONTESTED THAT ALL THE NECESSARY DETAILS W ERE VERY MUCH BEFORE THE ASSESSING OFFICER HENCE IT WAS NOT A CASE WHERE ANY HIDDEN AMOUNT OF SECRET TRANSACTION WAS DETECTED BY THE RE VENUE AUTHORITIES. IT WAS ALSO ARGUED THAT ONCE IT WAS AN ADMITTED FACT THAT THE TRANSACTIONS WERE DULY RECORDED IN THE BOOKS OF ACC OUNT AND THE INCOME WAS DISCLOSED BASED UPON THOSE VERY ACCOUNTS THERE FORE SUCH A TRANSACTION COULD NOT BE HELD AS BOGUS TRANSACTION. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS MENTI ONED THAT THE ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 15 - ASSESSEE HAS FURNISHED THE AUDIT REPORT AND UNDER T HE CURRENT LIABILITIES IN THE BALANCE-SHEET THE IMPUGNED AMOUNT WAS DULY D ISCLOSED. IT WAS NOT A CASE OF SECURED OR UNSECURED LOANS BUT THE CASE O F BUSINESS LIABILITY. THEREFORE THE CONNECTED DRAFTS OF THOSE PARTIES WE RE FOUND WITH THE ASSESSEE AND IT WAS EXPLAINED THAT THE AMOUNT IN QU ESTION DID NOT BELONG TO THE ASSESSEE BUT TO THOSE BUSINESS CREDITORS WHO WERE LATER ON REPAID OF THE AMOUNT. ONCE THE REVENUE DEPARTMENT HAS ACCEPT ED THE NATURE OF BUSINESS I.E. DISCOUNTING OF DRAFT/CHEQUE THEN TH ERE WAS NO QUESTION OF TREATING THE SAID AMOUNT AS UNDISCLOSED INCOME IN T HE HANDS OF THE ASSESSEE. 10. TO DEAL WITH THIS PENALTY PROCEEDINGS WE HAVE T O CONCENTRATE ON THE MAIN PROVISION OF THE I.T. ACT 1961 I.E. SECT ION 271(1)(C) OF THE I.T.ACT 1961.)(C) OF THE I.T. ACT 1961. WE HAVE ALSO TO EXAMINE EXPLANATION-1 APPENDED BELOW THIS MAIN SECTION PART ICULARLY CLAUSE-B OF EXPLANATION-1. THEREFORE FIRST WE SHALL DISCUSS C LAUSE(C) OF SECTION 271(1). IT IS A KNOWN FACT THAT EARLIER THERE WAS A WORD DELIBERATELY IN THIS CLAUSE WHICH WAS OMITTED WITH EFFECT FROM 01/ 04/1964. NOW THE CLAUSE(C) READS AS HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME . TO THIS CLAUSE OUR HUMBLE INTERPRETATION IS THAT EITHER THIS IS A CONC EALMENT OR FURNISHING OF INACCURATE PARTICULARS BOTH ARE IN RESPECT OF THE INCOME OF THE ASSESSEE WHICH HAS NOT BEEN DISCLOSED. TO FURTHER ELABORAT E THIS CLAUSE THE CONCEALMENT HAS A DIRECT NEXUS IN RESPECT OF THE IN COME OF THE ASSESSEE AS WELL AS INACCURACY ALSO HAS A DIRECT LINK WITH T HE INCOME OF THE ASSESSEE. THE THIS SECTION IS TO BE APPLIED IN TWO SITUATION ONE IS THAT THE ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 16 - PARTICULARS OF INCOME HAS BEEN CONCEALED AND THE OT HER IS THAT THE PARTICULARS OF INCOME ARE INACCURATELY FURNISHED. T HEREFORE THE CONCEALMENT OF INCOME OR INACCURACY OF INCOME BOTH HAS THE MAIN INGREDIENT FOR LEVY OF PENALTY U/S.271(1)(C). IF T HE REVENUE DEPARTMENT HAS DETECTED EITHER OF THE TWO; I.E. THE ASSESSEE W AS FOUND CONCEALED THE INCOME OR HE WAS FOUND OF FURNISHING OF INACCURATE PARTICULARS OF INCOME THEN ELIGIBLE FOR INVOCATION OF PENALTY PROCEEDINGS . 11. THE STATUTE HAS INSERTED EXPLANATION-1 TO SE CT. 271(1)(C) OF THE ACT THAT WHEREIN IN RESPECT OF ANY FACTS MATERIAL TO TH E COMPUTATION OF INCOME A PERSON OFFERS AN EXPLANATION AND THAT EXPL ANATION IS INCORRECT OR FALSE OR OFFERS NO EXPLANATION THEN THE AMOUNT IN QUESTION EITHER ADDED OR DISALLOWED IN THE COMPUTATION OF TAXABLE I NCOME THEN ALSO HE IS LIABLE OF CONCEALMENT OF INCOME AND THAT ADDITION O R DISALLOWANCE IS ALSO DEEMED TO REPRESENT THE CONCEALMENT OF INCOME. IT IS WORTH TO MENTION AT THIS VERY JUNCTURE THAT A PROVISO JUST BELOW EXP LANATION-1 GOT OMITTED WITH EFFECT FROM 10/09/1986 DUE TO WHICH THE BONA F IDES OF THE ASSESSEE GOT REDUNDANT. NOW THIS EXPLANATION HAS ONLY TWO SITUATIONS; ONE IS WHERE THE ASSESSEE GIVES NO EXPLANATION AT ALL AND THE SECOND IS WHERE THE ASSESSEE GIVES AN EXPLANATION BUT THE AUTHORITIES HAVE FOUND THE EXPLANATION AS A FALSE EXPLANATION. GENERALLY W E HAVE EXPERIENCED THAT THE ASSESSEE DOES OFFER AN EXPLANATION. THEREFORE THE FIRST LIMB OF THE EXPLANATION IN MOST OF SUCH CASE HAS A VERY LIMITED ROLE TO PLAY . THE SECOND LIMB IS ABOUT THE QUESTION OF FALSITY OF AN EXPLANATION. THE FALSITY OF A STATEMENT CAN WELL BE CONSIDERED AS BE ING MORE THAN A RULE OF EVIDENCE AND ONCE IT IS INCORPORATED IN THE ACT TH EREFORE NATURALLY IT IS ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 17 - ALSO TO BE CONSIDERED AS A RULE OF SUBSTANTIVE LAW RELATING TO THE LEVY OF PENALTY OF CONCEALMENT. AS SOON AS THE ASSESSEE OFFERS AN EXPLANATION THEN A VITAL QUESTION HAS ALWAYS BEEN RAISED THAT W HO HAS TO ESTABLISH THAT THE EXPLANATION AS OFFERED BY THE ASSESSEE WAS FOUN D TO BE FALSE OR NOT. TO OUR HUMBLE UNDERSTANDING THAT WHERE IN RESPECT O F ANY FACTS MATERIAL OF PURPOSES OF THE ASSESSMENT AN ASSESSEE OFFERS AN EXPLANATION WHICH WAS FOUND TO BE FALSE BY THE REVENUE DEPARTMENT HAS A CONCRETE BASIS OF LEVY OF THE PENALTY. BEFORE BLENDING AN EXPLANATI ON AS A FALSE EXPLANATION THE FIRST ONUS IS ON THE ASSESSEE TO S UBSTANTIATE ITS EXPLANATION. A BALD OR A BLAND OR AN INSIPID EXPL ANATION; I.E. WITHOUT ANY SUPPORTING EVIDENCE OR COGENT MATERIAL HAS NO LEGAL STATUS OR LAWFUL STANDING IN THE EYES OF LAW AND SUCH AN EXPLANATION CAN BE TREATED AS AN UNSUBSTANTIATED EXPLANATION. BUT IN A SITUATION W HEN AN EXPLANATION IS OFFERED AND THAT EXPLANATION TOO IS WELL SUBSTANTIA TED THEN THE BURDEN THEREUPON SHIFTS ON THE REVENUE TO PROVE THAT THE M ATERIAL THROUGH WHICH THE EXPLANATION IS SUBSTANTIATED AND THE EXPLANATIO N ITSELF IS UNTRUE OR FALSE IN NATURE. IN A WAY BY INSERTION OF EXPLANA TION-1 THE DEPARTMENTS ONUS HAS CONSIDERABLY BEEN REDUCED IF NOT ALTOGETH ER REMOVED FROM THE STATUTE BECAUSE THE FIRST ONUS IS ON THE ASSESSEE TO OFFER AN EXPLANATION THAT TOO BE DULY SUBSTANTIATED. 11.1 CLAUSE-B OF EXPLANATION-1 HAS SIGNIFICANT ROLE TO PLAY BECAUSE OF THE SELECTION OF THE WORDS BY THE LAW MAKERS WHI LE ENACTING THIS SUB-CLAUSE THEREFORE REPRODUCED BELOW:- ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 18 - EXPLANATION 1 .-WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON U NDER THIS ACT - (A) (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE 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 DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 11.2. WE CAN ENLIST THE ANALYSIS OF CLAUSE-B AS FOL LOWS:- (I) SUCH PERSON OFFERS AN EXPLANATION; MEANING TH EREBY ASSESSEE IS UNDER STRICT OBLIGATION TO OFFER AN EXP LANATION IF THE REVENUE ALLEGES THAT EITHER THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME. (II) SUCH PERSON OFFERS AN EXPLANATION WHICH IS NOT ABL E TO SUBSTANTIATE; MEANING THEREBY AN EXPLANATION WITHOU T SUPPORTING EVIDENCE HAS NO FORCE AND SUCH AN EXPLANATION IS NOTHING BUT MERELY A VERBOSITY WITH OUT ANY SUBSTANCE. ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 19 - (III) THE ASSESSEE HAS OFFERED AN EXPLANATION MAY OR MAY NOT BE SUBSTANTIATED BUT FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE THEN ALSO SUBJECT TO THE INVOCATION OF CONCEALMENT PROCEEDINGS. MEANING THEREBY A TAX-PAYER HAS TO COME FORWARD WIT H A CLEAN HEART AND TO DEMONSTRATE THAT THERE WAS A REASONABL E CAUSE OR JUSTIFIED CIRCUMSTANCES DUE TO WHICH THE PARTICULAR S FURNISHED WERE FOUND TO BE INACCURATE HOWEVER ALTOGETHER NOT FAILED TO OFFER AN INCOME FOR TAX PURPOSE. TO CONCLUDE THIS THOUGHT THREE STEPS ARE EXPECTED FROM THE ASSESSEE; FIRST ONE IS TO OFFER AN EXPLANATION SECOND IS TO SUBSTANTIATE THE EXPLANATION AND THIRD IS TO DEMONSTRATE THAT THERE WAS BONA FIDE REASON FOR THE IMPUGNED FAULT. IV) UP TO THIS EXTENT IF THE ASSESSEE HAS SUCCEEDED THEN OUR UNDERSTANDING IS THAT THE LAST LIMB OF EXPLANATION 1(B) HAS ALREADY BEEN COVERED BY SUCH AN ASSESSEE I.E. THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME HAVE BEEN DISCLOSED BY HIM. 12. THE SUMMUMBONUM OF THE ABOVE DISCUSSION IS THAT IN BOTH THE SITUATIONS THAT WHEN THE ASSESSEE HAS NOT FURNI SHED THE PARTICULARS OR WHEN FURNISHED INACCURATE PARTICULAR S IN EITHER WAY ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 20 - IF IT RESULTED INTO CONCEALMENT OF INCOME THEN SECT ION 271(1)(C) OF ACT IS TO BE INVOKED FOR LEVY OF PENALTY. TO FURTHE R CLARIFY IT IF AN EXPLANATION IS BONA FIDE AND DULY SUBSTANTIATED BY THE EVIDENCES AND THAT WAS NOT FOUND TO BE FALSE THEN NATURALLY A LL FACTS RELATING TO THE INCOME AND THE MATERIAL FACTS CONCERNING THE PA RTICULARS OF INCOME OUGHT TO HAVE BEEN PLACED ON RECORD. IN THOS E CIRCUMSTANCES AN ASSESSEE SHALL NOT BE HELD AS THE GUILTY OF CON CEALMENT OF INCOME. IN THE BACKGROUND OF THE ABOVE REFERRED A NALYSIS OF THE RELEVANT PROVISIONS OF CONCEALMENT NOW WE HAVE TO S EE WHETHER IN THE PRESENT APPEAL THE ASSESSEE HAS DULY DISCHARGED HIS PRIMARY ONUS OR WHETHER HE HAS ACTUALLY CONCEALED THE INCOME IN QUESTION. A SURVEY WAS CONDUCTED ON THE ASSESSEE BUT THIS IS NO T THE CASE OF THE REVENUE THAT THE ABOVE REFERRED ALLEGED CREDITORS WERE NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. AS PER THE ASSESSMENT ORDER ONLY DURING THE COURSE OF ASSESSM ENT PROCEEDINGS AND ON VERIFICATION OF BOOKS OF ACCOUNT UNDISPUTED LY AUDITED ACCOUNTS THE ASSESSING OFFICER HAD MADE CERTAIN EN QUIRIES WHICH WERE FOUND RECORDED AS SUNDRY CREDITORS APPEARING AS ON 31.3.2001. AN ELABORATE EXPLANATION WAS FURNISHED AND WE HAVE ALREADY CONSIDERED THE SAID EXPLANATION IN ABOVE PA RAS. WE HAVE ALSO NOTICED THE NATURE OF BUSINESS I.E. CHEQUE DI SCOUNTING AND SARAFFI BUSINESS. THE ASSESSEE HAS MADE VEHEMENT SUBMISSION BOTH DURING THE ASSESSMENT PROCEEDINGS AS WELL AS DURING PENALTY PROCEEDINGS THAT A SYSTEM WAS EVOLVED CONSIDERING THE LARGE ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 21 - NUMBER OF TRANSACTION TO RECORD THE NAMES ONLY. IT WAS ALSO VEHEMENTLY CONTESTED THAT THE ASSESSEE USED TO PROV IDE DISCOUNTING FACILITY DAILY IN AVERAGE TO 50 PERSONS. EVEN THE RESPECTED CO- ORDINATE BENCH HAD ALSO NOTED THAT WHEN THE CHEQUES ARE RECEIVED FROM THE DIFFERENT PARTIES AND AFTER ENCASHING THOS E CHEQUES THE CASH WAS PAID TO THOSE VERY PARTIES. SINCE THE TRANSACT ION WAS SQUARED UP THEN AND THERE THEREFORE THE EXPLANATION OF THE A SSESSEE WAS THAT FOR BUSINESS POINT OF VIEW HE WAS NOT REQUIRED TO MAINT AIN THE RECORD OF FULL ADDRESS AND IDENTITY OF THOSE PERSONS. IT IS ALTOGETHER DIFFERENT THAT THE REQUIREMENT OF SECTION 68 OF THE I.T.ACT W AS NOT FULFILLED BUT PENALTY PROCEEDINGS BEING SEPARATE AND DISTINCT AS HELD IN THE CASE OF ANANTRAMAN VERSINGHAIAH AND CO. REPORTED AT 123 ITR 457(SC) THEREFORE WE HAVE ANALYZED IN DETAIL THE POSSIBILI TY OF LEVY OF CONCEALMENT PENALTY INDEPENDENTLY. IT IS THEREFOR E NECESSARY TO RECONSIDER AND ALSO RE-APPRECIATE THE FACTS ONLY IN THE LIGHT OF THE PROVISIONS AS ENVISAGED IN SECTION 271(1)(C) OF THE I.T.ACT. FROM THE ABOVE DISCUSSION IT IS APPARENT THAT THE PENAL PROVISIONS SHALL OPERATE ONLY IN A SITUATION WHERE THERE IS A FAILUR E TO DISCLOSE FULLY OR ALSO TRULY ALL THE PARTICULARS. IN THE PRESENT CAS E ALL THE PARTICULARS WERE VERY MUCH BEFORE THE REVENUE AUTHORITIES AND T HOSE PARTICULARS WERE PART AND PARCEL OF THE AUDIT REPOR T AS ALSO INCOME TAX RETURN. NO EVIDENCE WAS FOUND DURING THE SURVE Y THAT THE BOOKS OF ACCOUNT WERE FALSE OR NOT GENUINE. BY INV OKING THE PROVISIONS OF SECTION 68 OR BY REJECTING THE EXPLAN ATION OF THE ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 22 - ASSESSEE A PRESUMPTION WAS DRAWN AGAINST THE ASSES SEE BUT THAT PRESUMPTION WAS REBUTTABLE AND NOT AT ALL CONCLUSIV E PARTICULARLY WHEN CONSIDERING THE SAID EXPLANATION IN THE LIGHT OF THE PENALTY PROCEEDINGS. THE SAID EXPLANATION WAS NOT REMAINED UNSUBSTANTIATED. IT CAN ALSO NOT BE HELD THAT THE EXPLANATION WAS NOT BONA FIDE AS PRESCRIBED IN EXPLANATION TO SECTION 2 71(1)(C) OF THE I.T.ACT DISCUSSED HEREINABOVE. ALL THE FACTS RELA TING TO THE PARTICULARS OF INCOME WERE DULY PLACE ON RECORD AND ON THAT BASIS IT WAS FERVENTLY CONTESTED THAT THE IMPUGNED AMOUNT DI D NOT BELONG TO ASSESSEE BUT TO THOSE CREDITORS THEREFORE NOT AT ALL AN INCOME OF THE ASSESSEE WHAT TO SAY THE CONCEALED INCOME OF THE ASSESSEE. TO CONCLUDE WE ARE NOT CONVINCED THAT THIS IS A FI T CASE TO OVERRULE THE SAID EXPLANATION OF THE ASSESSEE. WE THEREFOR E HOLD THAT THE ADDITION IN QUESTION WAS OUT OF THE AMBITS OF THE C ONCEALMENT PROCEEDINGS. WE HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND DIRECT TO DELETE THIS PART OF THE PENALTY . 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 31/ 3 /2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31 / 3 /2011 T.C. NAIR SR. PS ITA NO.623/AHD/ 2007 JANKAR SHROFFIN PVT.LTD. VS. ITO ASST.YEAR - 2001-02 - 23 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED.4. THE LD. CIT(APPEALS)-I SUR AT 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD 1. DATE OF DICTATION..29/03/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29/03/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 31.3.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.3.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER