The DCIT, Circle-2,, JUNAGADH v. M/s K. Bhanji Vanmalidas & Sons,, AMRELI

ITA 743/RJT/2010 | 1989-1990
Pronouncement Date: 31-12-2010 | Result: Dismissed

Appeal Details

RSA Number 74324914 RSA 2010
Bench Rajkot
Appeal Number ITA 743/RJT/2010
Duration Of Justice 9 month(s) 27 day(s)
Appellant The DCIT, Circle-2,, JUNAGADH
Respondent M/s K. Bhanji Vanmalidas & Sons,, AMRELI
Appeal Type Income Tax Appeal
Pronouncement Date 31-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 31-12-2010
Date Of Final Hearing 14-12-2010
Next Hearing Date 14-12-2010
Assessment Year 1989-1990
Appeal Filed On 03-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO.743/RJT/2010 (ASSESSMENT YEAR 1989-90) THE DY.CIT CIR.2 VS M/S K BHANJI VANMALIDAS & C O JUNAGADH KANSARA BAZAR AMRELI PAN :NOT AVAILABLE (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAI RAJ KUMAR RESPONDENT BY : SHRI DV LALCHANDANI O R D E R GARASIA : THIS APPEAL FILED BY THE REVENUE IS DIREC TED AGAINST THE ORDER OF CIT(A)- IV RAJKOT DATED 18-12-2009 FOR THE ASSESSMENT YEAR 1989-90 WHEREBY THE LD.CIT(A) CANCELLED THE PENALTY OF RS. 3 76 702 IMP OSED U/S 271(1)(C) OF THE ACT. 2. THE FACTS LEADING TO THE IMPOSITION OF IMPUGNED PENALTY ARE THAT AS AGAINST A RETURNED LOSS OF RS. 86 850 THE ASSESSING OFFICE R COMPUTED AN INCOME OF RS.7 76 320 IN HIS ORDER U/S 143(3) DATED 26-03-199 2 BY MAKING VARIOUS ADDITIONS. THE MAJOR CONSTITUENT IN THE ADDITIONS WAS THAT OF CASH CREDITS APPEARING IN THE NAMES OF 22 PARTIES MENTIONED IN T HE ASSESSMENT ORDER AGGREGATING TO RS. 6 90 256. HE ALSO INITIATED PEN ALTY PROCEEDINGS U/S 271(1) OF THE ACT. THE APPEAL PREFERRED BY THE ASSESSEE A GAINST THE ASSESSMENT DID NOT FIND FAVOUR WITH THE CIT(A) WHO DISMISSED THE APPE AL. AFTER THE CIT(A) CONFIRMED THE ASSESSMENT ORDER THE ASSESSING OFFIC ER CALLED FOR EXPLANATION FROM THE ASSESSEE AS TO WHY CONCEALMENT PENALTY U/S 271( 1)(C) OF THE ACT SHOULD NTO BE IMPOSED ON THE ASSESSEE. REJECTING THE EXPLANAT IONS FILED BY THE ASSESSEE VIDE LETTERS DATED 10-12-1992 AND 09-03-1993 THAT T HE ASSESSEE HAD FILED APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER CIT(A) AND TH EREFORE THE PENATY PROCEEDINGS MAY BE KEPT IN ABEYANCE THE ASSESSING OFFICER FOR THE DETAILED REASONS MENTIONED AT PARAGRAPH 6 TO 7 OF HIS ORDER U/S 271(1)(C) DATED 27-04- ITA NO.743/RJT/2010 2 1993 HAS HELD THAT THE ASSESSEE HAS CONCEALED THE I NCOME AND THEREBY COMMITTED AN OFFENCE U/S 271(1)(C) OF THE ACT AND T HEREFORE HE IMPOSED A PENALTY OF RS.3 76 702. ASSESSEE CHALLENGED THE OR DER U/S 271(1)(C) OF THE ACT BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL O F THE ASSESSEE BY CANCELLING THE PENALTY WITH THE FOLLOWING FINDINGS: 3.8 ON PERUSAL OF FACTS I FIND THAT THE ADDITIONS U/S 68 IN RESPECT OF CASH CREDIT AND INTEREST ON CASH CREDITS WERE MA DE AND CONFIRMED AS THE APPELLANT WAS NOT ABLE TO DISCHARG E THE PRIMARY ONUS AND THE EVIDENCES PLACED ON RECORD BY IT WERE CONSIDERED AS INSUFFICIENT AND THE HONBLE ITAT VIDE ORDER DTD 30 -08-2005 HAS DELETED THE ADDITION F RS.133000/- OUT OF CASH CRED ITS AND RESTRICTED THE ADDITION AMOUNTING TO RS.575903/- ON ACCOUNT OF CASH CREDITS AND INTEREST PAYMENT. THE CASH CREDIT AMOUNTS AND INTEREST PAID THEREON WAS DULY DECLARED BY THE APPELLANT IN THE B OOKS OF ACCOUNT AND HENCE ALREADY DISCLOSED AND THEREFORE THE EXP LANATION 1 TO SEC 271 WILL NOT APPLY TO THE APPELLANT. THE CONCE ALMENT MUST BE DELIBERATE AND THERE BEING NO PROOF OF SUCH DELIBER ATE CONCEALMENT THE IMPOSITION OF PENALTY WAS NOT WARRANTED. THERE WAS NO DELIBERATE INTENTION ON THE PART OF THE APPELLANT A LSO TO FURNISH INACCURATE PARTICULARS OF INCOME. THIS VIEW ALSO F INDS SUPPORT FROM THE FOLLOWING DECISIONS:- (I) CIT VS SUBHASH TRADING CO (1996) 221 ITR 110 ( GUJ) (II) NAVJIVAN OIL MILLS VS CIT (2001) 252 ITR 417 ( GUJ) (III) CIT VS SANGRUR VANASPATI MILLS LTD (SLP ITR 3 03 ST.P- 18(SC) (IV) KANBAY SOFTWARE VS DCIT ITGAT PUNE BENCH ITA NO.300/PN/07 (V) SMT. BHANUBEN CHIMANLAL MALAVIA VS ITO (2006) 1 00 TTJ (RJT) 337 (VI) CIT VS JALARAM OIL MILL (2001) 171 CTR (GUJ) 4 26 (VII) HONBLE ITAT RAJKOT BENCH IN CASE OF ITO VS M /S CENTRAL SALES CORPORATION DHORAJI IN ITA NO.1499/RJT/2005 THE EXPLANATION OF THE APPELLANT IS NOT FOUND TO BE FALSE AND SAME IS FOUND BONAFIDE. IT IS ALSO FOUND THAT THE APPEL LANT HAS DISCLOSED ALL THE FACTS RELATING TO THE ABOVE EXPLANATION AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME. AS SUCH NO PENALT Y IS LEVIABLE. IN VIEW OF ALL ABOVE FACTS AND LEGAL POSITION AND CASE -LAWS IT IS HELD THAT IT IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271 (1) OF THE I.T. ACT 1961. ACCORDINGLY PENALTY OF RS.376702/- LEVIED U/ S 271(1)(C) OF THE I.T. ACT IS HEREBY ORDERED TO BE CANCELLED. ITA NO.743/RJT/2010 3 3. AGGRIEVED BY THE ORDER OF CIT(A) CANCELLING THE PENALTY THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD.DR SUBMITTED THAT THERE WAS A SEARCH AND SEIZURE ACTION U/S 132 AT THE BUSINESS PREMISES OF THE ASSESSEE AND AT THE RE SIDENTIAL PREMISES OF THE PARTNERS IN WHICH SUBSTANTIAL UNEXPLAINED STOCK WAS FOUND. THE ASSESSING OFFICER EXAMINED VARIOUS CASH CREDITS DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. SUMMONS WERE ISSUED TO THOSE 22 CASH CREDITORS AND THEIR STATEMENTS RECORDS AND THE ASSESSEE THE ASSESSEE WA S PROVIDED OPPORTUNITY TO CROSS EXAMINE THEM. AND AFTER A DETAILED DISCUSSIO N THE ASSESSING OFFICER TREATED CASH CREDITS TO THE TUNE OF RS.6 90 256 AS NON GENUINE AND INTEREST THEREON AMOUNTING TO RS. 90 900 WAS ALSO ADDED. HE SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN CANCELLING THE PENALTY AS EVEN THE TRIBUNAL HAS UPHELD THE ADDITION TO THE EXTENT OF RS. 5 97 903. THE LD.DR THEREFORE EMPHATICALLY STATED THAT THE ASSESSEE CONCEALED THE INCOME TO THAT EXTE NT BY SHOWING BOGUS CASH CREDITS IN THE NAMES OF THOSE PARTIES. THE LD.DR P RAYED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER MAY BE RESTORED. 5. THE LD.AR ON THE OTHER HAND SUBMITTED THAT THE PENALTY WAS LEVIED ON THE BASIS OF ADDITION MADE IN ASSESSMENT ORDER DATED 26 -03-1992. THE ADDITION WAS CONFIRMED BY THE CIT(A) IN THE ORDER PASSED EX PART E. WHEN THE MATTER TRAVELLED BEFORE THE TRIBUNAL THE ADDITION IN RESPECT OF FOU R CREDITORS AGGREGATING TO RS.1 33 000 WAS DELETED. HE SUBMITTED THAT THE ASS ESSEE HAD FURNISHED ALL THE EVIDENCES IN RESPECT OF THE PARTIES THE CASH CREDI TS OF WHICH WERE NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER. IN MOST OF TH E CASES THE ASSESSEE HAS FILED THE CONFIRMATION LETTERS AND HAD ALSO PRODUCED THE PARTIES BEFORE THE ASSESSING OFFICER VERIFICATION AND THEIR STATEMENTS RECORD. THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT FOUND TO BE FALSE WHICH WAS DULY S UPPORTED BY CONFIRMATIONS FROM THE PARTIES. FOR THIS PROPOSITION THE LD.AR R ELIED N THE JUDGMENT IN THE CASE OF CIT VS BARODA TIN WORKS 221 ITR 661 WHEREIN IT H AS BEEN HELD THAT THE LAW IS WELL SETTLED THAT THOUGH THE FINDING RECORDED IN TH E ASSESSMENT ORDERS ARE ITA NO.743/RJT/2010 4 RELEVANT EVIDENCE TO SUPPORT THE ALLEGATION F CONCE ALMENT BUT THESE CANNOT BE THE FOUNDATION FOR HOLDING THE ASSESSEE GUILTY OF C ONCEALMENT. THE FICTIN CREATED U/SS 68 69 69A 69B AND 69C BY ITSELF CANNOT BE E XTENDED TO PENALTY PROCEEDINGS TO RAISE THE PRESUMPTION ABOUT CONCEALM ENT OF SUCH INCOME. THE LD.AR PRAYED THAT THE LD.CIT(A) WAS JUSTIFIED IN HI S ACTION OF CANCELLING THE PENALTY AND THEREFORE HIS ORDER MAY BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL PLACED BEFORE US. WE FIND THAT WHILE IT IS TRUE TH AT MAJORITY OF THE CASH CREDITS WERE NOT ACCEPTABLE EVEN TO THE TRIBUNAL THIS ALON E CANNOT BE THE FOUNDATION FOR HOLDING THE ASSESSEE GUILTY OF CONCEALMENT. THE AS SESSEE IN OUR OPINION HAS REASONABLY EXPLAINED THAT THE ADDITION WAS MADE AND CONFIRMED AS THE ASSESSEE COULD NTO DISCHARGE THE PRIMARY ONUS WHICH LAY ON I T UNDER THE LAW. THE VARIOUS EVIDENCES SUBMITTED BY IT WERE NOT CONSIDERED AS SU FFICIENT TO PROVE THE CASH CREDIT AND AVOID THE DEEMING FICTION PROVIDED IN SE CTION 68 OF THE ACT. THERE IS NOTHING ON RECORD TO PROVE THAT THE ADDITION REPRES ENTS THE CONCEALED INCOME AND THAT THE SAME IS CONSCIOUSLY CONCEALED. THERE IS NOTHING ON RECORD TO CLEARLY SHOW THAT THE CASH CREDITS AND INTEREST PAI D THEREON ARE CONCEALED INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS ARE IN DEPENDENT AND SEPARATE FROM THE ASSESSMENT PROCEEDINGS AND THAT PENALTY IS NOT AUTOMATIC ON CONFIRMATION OF ADDITION. THERE IS A SETTLED AND C LEAR DISTINCTION BETWEEN ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS. IN ASSESSMENT PROCEEDINGS THE PRIMARY BURDEN LIES ON THE APPELLANT TO PROVE H IS CASE AND IN THE CASE OF FAILURE ON THE PART OF THE ASSESSEE ADDITION WOULD BE MADE TO THE INCOME OF THE ASSESSEE. HOWEVER PROCEEDINGS ARE MUCH DIFFERENT AS THEY ARE PENAL IN NATURE. IN PENALTY PROCEEDINGS THE FACTS AND CIRCUMSTANCES SHOULD BE CONSIDERED AFRESH FROM A DIFFERENT ANGLE AND FOR THAT FINDINGS ARRIVE D IN THE ASSESSMENT PROCEEDINGS WILL NOT BE ENOUGH. ON REPPRAISAL OF FACTS AND CIR CUMSTANCES THERE SHOULD BE FOUND A CONSCIOUS AND WILLFUL DEFAULT ON THE PART O F THE ASSESSEE WHICH RESULTS IN UNLAWFUL WITHHOLDING OF REVENUE. BY NO STRETCH F I MAGINATION MERE FAILURE F THE ASSESSEE CAN BE EQUATED WITH SUCH CONSCIOUS AND WIL LFUL DEFAULT. THE BURDEN OF ITA NO.743/RJT/2010 5 PROOF LIES ON THE ASSESSEE TO PROVE THAT ASESSEE HA D ACTED IN A BONA FIDE MANNER AND THERE IS NO CONSCIOUS DEFAULT. THE NON BONA FIDE CONDUCT OF THE ASSESSEE SHOULD BE APPARENT FROM THE FACTS AND CIRC UMSTANCES AND IT SHOULD NOT BE DIGGED OUT BY APPLYING THEORIES OF PROBABILITIES AND ASSUMPTIONS. UNLESS EXPLANATION OF THE ASSESSEE ARE HELD AS FALSE AND N ON BONA FIDE PENALTY IS NOT ATTRACTED. THIS VIEW IS FORTIFIED BY THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NATIONAL TEXTILE 249 ITR 125 (G UJ) WHERE THE LEVY OF PENALTY WITH REFERENCE TO SECTION 68 WAS CONSIDERED. THERE FORE CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES WE ARE NOT INCLINED TO ACCEPT THE VERSION OF THE DEPARTMENT THAT THE ASSESSEE TRIED TO INTRODUCE ITS UNDISCLOSE D INCOME THROUGH INTRODUCING BOGUS CASH CREDITS. 7. T HE PROCEEDINGS UNDER SECTION 271(1) (C) CAN BE INIT IATED ONLY IF THE A.O OR THE FIRST APPELLATE AUTHORITY IS SATISFI ED IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT AS PER CLAUSE (C) OF THE SECTION 271(1) THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INC OME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE SUM MEN TIONED IN SUB- CLAUSE (III) OF CLAUSE (C) OF THE SECTION 271(1). T HE EXPRESSION USED IN CLAUSE (C) OF THE SECTION 271(1) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUC H INCOME. THEREFORE BOTH IN CASES OF CONCEALMENT AND INACCURACY THE PHR ASE PARTICULARS OF INCOME ARE USED. IT WILL BE NOTED THAT AS REGARDS CONCEALMENT THE EXPRESSION IN CLAUSE (C) OF THE SECTION 271(1) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME AND NOT HAS CONCEALED H IS INCOME. THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOM E' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NO T BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT . TWO WORDS ARE IMPORTANT WORDS FOR CONSIDERING A MATTER FOR LEVY O F PENALTY UNDER SECTION 271(1) OF THE ACT . THESE WORDS ARE CONCE ALED' AND ITA NO.743/RJT/2010 6 'INACCURATE PARTICULARS' .THE APEX COURT IN THE CAS E OF RELIANCE PETROPRODUCTS PVT.LD. (322 ITR 158) ( AT PAGE 164 ) REGARDING THE WORD PARTICULARS USED IN THIS SECTION OF THE SECTION 271(1) (C) HAS HELD AS UNDER:_ THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEN D UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE THE LI ABILITY WOULD ARISE. 8. NOW COMING TO THE MEANING OF WORDS INACCURATE AND CONCEAL. AS STATED ABOVE THESE WORDS HAVE NOT BEEN DEFINED IN THE ACT. HOWEVER IN WEBSTERS DICTIONARY THE WORD 'INACCUR ATE' HAS BEEN DEFINED AS UNDER: 'NOT ACCURATE NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT COPY OR TRAN SCRIPT.' 9. THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN CON CELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NEW INTE RNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HIDE OR WITHDRAW FROM OBSER VATION TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WI THHOLD KNOWLEDGE OF'. THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF T HE INCOME-TAX AUTHORITIES. 10. THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LD. (322 ITR 158) HAS CONSIDERED SOME OTHER CASES OF THE APEX COURT ON THE ISSUE AT PAGE 164 AND 165 AND OBSERVED AS UNDE R:- IN DILIP N. SHROFF V. JT. CIT [2007] 6 SCC 329 TH IS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY U NDER ITA NO.743/RJT/2010 7 SECTION 271(1)( C) MENS REA WAS NECESSARY AS ACCO RDING TO THE COURT THE WORD 'INACCURATE' SIGNIFIED A DEL IBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (III) OF SECTION 271(1) PROVIDED F OR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHO RITY INASMUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON O F SUCH CONCEALMENT OF PARTICULARS OF INCOME BUT IT MAY NO T EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURATE PARTICULARS' WAS NOT DEFINED ANYWHERE I N THE ACT AND THEREFORE IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING ACCURATE PARTICULARS. IT WAS FURTHER HELD THAT THE ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER THE ASSESSEE HAD FURNISHED THE PARTICULARS OF HIS INCOME. THE COURT ULTIMATELY WEN T ON TO HOLD THAT THE ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFFS CASE (SUPRA) WAS UPSET. IN DHARAMENDRA TEX TILE PROCESSORS CASE (SUPRA) AFTER QUOTING FROM SECTIO N 271 EXTENSIVELY AND ALSO CONSIDERING SECTION 271(1)( C) THE COURT CAME TO THE CONCLUSION THAT SINCE SECTION 271 (1)( C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE AS SESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURATE PARTICULAR S WHILE FILING RETURN THERE WAS NO NECESSITY OF MENS REA. THE COURT WENT ON TO HOLD THAT THE OBJECTIVE BEHIND ENA CTMENT OF SECTION 271(1)( C) READ WITH EXPLANATIONS INDICA TED WITH ITA NO.743/RJT/2010 8 THE SAID SECTION WAS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A CIVIL LIABILITY AN D THEREFORE WILFUL CONCEALMENT IS NOT AN ESSENTIAL I NGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN T HE MATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT. THE BASI C REASON WHY DECISION IN DILIP N. SHROFFS CASE (SUPR A) WAS OVERRULED BY THIS COURT IN DHARAMENDRA TEXTILE PROC ESSORS CASE (SUPRA) WAS THAT CCORDING TO THIS COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 27 6C OF THE ACT WAS LOST SIGHT OF IN CASE OF DILIP N.SHROFF (SUPRA). HOWEVER IT MUST BE POINTED OUT THAT IN DHARAMENDRATEXTILE PROCESSORS CASE (SUPRA) NO FAU LT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N . SHROFFS CASE (SUPRA) WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCEAL' AND 'INACCURATE'. IT WAS ONLY THE ULTIMATEINFERENCE IN DILIP N. SHROFFS CASE (SUPRA) TO THE EFFECT THAT MENS REA WASAN ESSENTIAL INGREDIENT FOR THE PENALTY UNDER SECTION 271(1)(C) THAT THE DECISION I N DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED. 11 FROM ABOVE DISCUSSIONS WE FIND THAT THERE IS STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE P ARTICULARS WHILE FILING THE RETURN. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY. IT IS OBVIOUS THAT THE PENAL PROVISIONS WOULD OPERATE WHEN THERE IS CONCEALMENT OF PARTICULARS OF INCOME OR A FAILURE OF DUTY TO DISCLOSE FULLY AND TRULY PARTICULARS OF INCOME IMP OSED UNDER THE ACT AND THE RULES THERE UNDER. THE DUTY IS ENJOINED UPO N A PERSON TO MAKE A CORRECT AND COMPLETE DISCLOSURE OF PARTICULARS OF HIS INCOME AND IT IS ONLY WHEN HE FAILS IN HIS DUTY BY NOT DISCLOSING PA RTICULARS OF HIS INCOME OR PART THEREOF HE CONCEALS THE PARTICULARS OF HIS INCOME. THE ITA NO.743/RJT/2010 9 DUTY IS ENJOINED UPON HIM TO MAKE A COMPLETE DISCLO SURE OF PARTICULARS OF HIS INCOME AS WELL AS A CORRECT DISCLOSURE. THER EFORE IF THE DISCLOSURE MADE OF THE PARTICULARS OF INCOME IS INC ORRECT THEN ALSO HE COMMITS BREACH OF HIS DUTY. SUCH DEFAULTS ENTAIL TH E PENAL CONSEQUENCES CONTEMPLATED BY SECTION 271(1) (C). 12. THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR D ETECTION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME AND INDEED CONCEALMENT OF PARTICULARS OF INC OME AND IN ACCURATE PARTICULARS OF INCOME MAY AT TIMES OVERLAP . IT DEPENDS UPON THE FACTS OF THE EACH CASE. IN THE ASSESSMENT PROCE EDINGS THE AO WHILE ASCERTAINING THE TOTAL INCOME CHARGEABLE TO T AX WOULD BE IN A POSITION TO DETECT THE SPECIFIC OR DEFINITE PARTICU LARS OF INCOME CONCEALED OR OF WHICH FALSE PARTICULARS ARE FURNISH ED. WHERE IN THE CONSTITUENTS OF INCOME RETURNED SUCH SPECIFIC OR D EFINITE PARTICULARS OF INCOME ARE DETECTED AS CONCEALED THEN EVEN IN THE TOTAL INCOME FIGURE TO THAT EXTENT THEY REFLECT IT WOULD AMOUNT TO CON CEALMENT TO THAT EXTENT. IN THE SAME WAY WHERE SPECIFIC AND DEFINITE PARTICULARS OF INCOME ARE DETECTED AS INACCURATE THEN SUCH FIGURE WILL ALSO MAKE THE TOTAL INCOME INACCURATE IN PARTICULARS TO THE EXTEN T IT DOES NOT INCLUDE SUCH INCOME. IN OTHER WORDS THE AO CANNOT INVOKE PR OVISION OF SECTION271 (1) (C) ON THE BASIS ROUTINE AND GENERAL PRESUMPTIONS. WHETHER IT BE A CASE OF ONLY CONCEALMENT OR OF ONLY INACCURACY OR BOTH THE PARTICULARS OF INCOME SO VITIATED WOULD BE SPEC IFIC AND DEFINITE AND BE KNOWN IN THE ASSESSMENT PROCEEDINGS BY THE ITO WHO ON BEING SATISFIED ABOUT EACH CONCEALMENT OR INACCURACY OF P ARTICULARS OF INCOME WOULD BE IN A POSITION TO INITIATE THE PENAL TY PROCEEDINGS ON ONE OR BOTH OF THE GROUNDS OF DEFAULT AS MAY HAVE B EEN SPECIFICALLY AND DIRECTLY DETECTED. ITA NO.743/RJT/2010 10 13. IN ADDITION TO MAIN PROVISIONS OF CONCEALMENT HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCU RATE PARTICULARS OF SUCH INCOME THERE ARE DEEMED TO REPRESENT THE INCO ME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED .THE DEEMED C ONCEALMENT IS PROVIDED IN EXPLANATIONS. OFTEN A QUESTION AROSE WH ETHER IN CASES WHERE ADDITIONS OR DISALLOWANCES MADE BY THE ITO TH E PENAL PROVISIONS OF SECTION 271(1)(C) WOULD ATTRACT. EXPLANATION 1 T AKES CARE OF THIS SITUATION. THE EXPLANATION 1 TO SECTION 271(1) OF T HE ACT READS AS UNDER:- EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATE RIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEM ED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. 14. A CONSPECTUS OF THE EXPLANATION MAKES IT CLEAR THAT THE STATUTE VISUALISED THE ASSESSMENT PROCEEDINGS AND PENALTY P ROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. IN E SSENCE THE EXPLANATION IS A RULE OF EVIDENCE. PRESUMPTIONS WHI CH ARE REBUTTING TABLE IN NATURE ARE AVAILABLE TO BE DRAWN. THE INIT IAL BURDEN OF DISCHARGING THE ONUS OF REBUTTAL IS ON THE ASSESSEE . THE RATIONALE BEHIND THIS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. SECTION 106 OF THE INDIAN EVIDENCE ACT 1872 GIVES STATUTORY RECOGNITION TO THIS UNIVERSALLY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION CONFERRED ON THE ASSESSING O FFICER AS TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. EXPLANATION 1 COMES INTO ITA NO.743/RJT/2010 11 OPERATION WHEN IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON THERE IS FAILURE TO OFF ER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALSE B Y THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY OR AN EXP LANATION IS OFFERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE THE AMO UNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. AS PER THE PROVISION OF EXPLANATION 1 THE ONUS TO ESTABLISH T HAT THE EXPLANATION OFFERED WAS BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED B Y HIM WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. 15. THE ISSUE RELATING TO BONAFIDE AND FALSE RE TURNS IN IMPOSING PENALTY ON THE ASSESSEE UNDER SECTION 43 OF THE MAD HYA PRADESH GENERAL SALES TAX ACT 1958 AND SECTION 9(2) OF TH E CENTRAL SALES TAX ACT 1956 HAVE BEEN EXAMINED BY THE APEX COURT IN T HE CASE OF CEMENT MARKETING CO. OF INDIA LTD. V .ASSISTANT COM MISSIONER OF SALES TAX [1980] 4 TAXMAN 44 (SC) 124 ITR 15 (SC). FACTS IN BRIEF OF THIS CASE WERE THAT THE ASSESSEE-COMPANY EFFECTED CERT AIN TRANSACTIONS OF SALE OF CEMENT IN ACCORDANCE WITH THE PROVISIONS OF THE CEMENT CONTROL ORDER DURING THE ASSESSMENT PERIOD 1-8-1971 TO 31-7 -1972. THE AMOUNT OF FREIGHT INCLUDED IN THE 'FREE ON RAIL DES TINATIONS RAILWAY STATION' WAS PAID BY THE PURCHASERS AND HENCE THE A SSESSEE DEDUCTED FROM THE PRICE SHOWN IN THE INVOICES SENT TO THE PU RCHASERS. IN THE COURSE OF ITS ASSESSMENT TO SALES TAX UNDER THE MAD HYA PRADESH GENERAL SALES TAX ACT 1958 AND THE CENTRAL SALES T AX ACT 1956 THE ASSESSEE DID NOT INCLUDE THE SAID AMOUNT OF FREIGHT IN ITS TAXABLE TURNOVER ON THE GROUND THAT IT DID NOT FORM PART OF THE SALE PRICE. IN HIS TWO SEPARATE ASSESSMENT ORDERS ONE UNDER THE CENTR AL SALES TAX ACT 1956 AND THE OTHER UNDER THE MADHYA PRADESH GENERA L SALES TAX ACT 1958 THE ASSISTANT COMMISSIONER HOWEVER INCLUDED THE SAME IN THE ITA NO.743/RJT/2010 12 TAXABLE TURNOVER FOR LEVYING TAX. HE ALSO IMPOSED H EAVY PENALTY ON ACCOUNT OF THE ASSESSEE'S FAILURE TO DISCLOSE THE S AME IN ITS TAXABLE RETURNS. ON DIRECT APPEAL TO THE SUPREME COURT HELD THAT IT IS DIFFICULT TO SEE HOW THE ASSESSEE COULD BE SAID TO HAVE FILED 'F ALSE' RETURNS WHEN WHAT THE ASSESSEE DID NAMELY NOT INCLUDING THE AM OUNT OF FREIGHT IN THE TAXABLE TURNOVER WAS UNDER A BONA FIDE BELIEF THAT THE AMOUNT OF FREIGHT DID NOT FORM PART OF THE SALE PRICE AND WAS NOT INCLUDIBLE IN THE TAXABLE TURNOVER. THE CONTENTION OF THE ASSESSEE TH ROUGHOUT WAS THAT ON A PROPER CONSTRUCTION OF THE DEFINITION OF 'SALE PRICE' IN SECTION 2(O) OF THE MADHYA PRADESH GENERAL SALES TAX ACT 1958 AND SECTION 2(H) OF THE CENTRAL SALES TAX ACT 1956 THE AMOUNT OF F REIGHT DID NOT FALL WITHIN THE DEFINITION AND WAS NOT LIABLE TO BE INCL UDED IN THE TAXABLE TURNOVER. THIS WAS THE REASON WHY THE ASSESSEE DID NOT INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER IN THE RE TURNS FILED BY IT. THE COURT FURTHER HELD THAT IT WAS A HIGHLY ARGUABLE CO NTENTION WHICH REQUIRED SERIOUS CONSIDERATION BY THE COURT AND THE BELIEF ENTERTAINED BY THE ASSESSEE THAT IT WAS NOT LIABLE TO INCLUDE T HE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER COULD NOT BE SAID TO BE MALA FIDE OR UNREASONABLE. WHAT SECTION 43 OF THE MADHYA PRADESH GENERAL SALES TAX ACT 1958 REQUIRES IS THAT THE ASSESSEE SHOULD HAVE FILED A 'FALSE' RETURN. WHERE THE ASSESSEE DOES NOT INCLUDE A PARTI CULAR ITEM IN THE TAXABLE TURNOVER UNDER A BONA FIDE BELIEF THAT HE I S NOT LIABLE SO TO INCLUDE IT IT WOULD NOT BE RIGHT TO CONDEMN THE RE TURN AS A 'FALSE' RETURN INVITING IMPOSITION OF PENALTY. THE COURT HE LD THAT IF THE VIEW CANVASSED ON BEHALF OF THE REVENUE WERE ACCEPTED T HE RESULT WOULD BE THAT EVEN IF THE ASSESSEE RAISES A BONA FIDE CONTEN TION THAT A PARTICULAR ITEM IS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TU RNOVER HE WOULD HAVE TO SHOW IT AS FORMING PART OF THE TAXABLE TURNOVER IN HIS RETURN AND PAY TAX UPON IT ON PAIN OF BEING HELD LIABLE FOR PENALT Y IN CASE HIS CONTENTION IS ULTIMATELY FOUND BY THE COURT TO BE N OT ACCEPTABLE. THAT SURELY COULD NEVER HAVE BEEN INTENDED BY THE LEGISL ATURE. UNDER THE ITA NO.743/RJT/2010 13 CIRCUMSTANCE OF THE CASE THE COURT WAS OF THE VIEW THAT THE ASSESSEE COULD NOT BE SAID TO HAVE FILED 'FALSE' RETURNS WHE N IT DID NOT INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER SHOWN IN THE RETURNS AND THE ASSISTANT COMMISSIONER WAS NOT JUSTIFIED IN IMP OSING PENALTY ON THE ASSESSEE UNDER SECTION 43 OF THE MADHYA PRADESH GENERAL SALES TAX ACT 1958 AND SECTION 9(2) OF THE CENTRAL SALE S TAX ACT 1956. 16. FROM THE ABOVE DISCUSSION OF SCHEME OF THE ACT TWO IMPORTANT THINGS COME OUT ARE THAT IT IS THE DUTY OF THE ASSE SSEE TO FURNISH PARTICULARS OF INCOME SIMULTANEOUSLY HE HAS RIGHT T O CLAIM ALL EXEMPTIONS AND DEDUCTIONS PROVIDED IN THE ACT ACCO RDING TO THE ASSESSEE FOR WHICH HE IS ENTITLED. THE DUTY OF THE ASSESSING OFFICER IS TO ASSESS REAL AND CORRECT INCOME IN ACCORDANCE WIT H LAW. THE CBDT IN ITS CIRCULAR NO. 14(XL35) OF 1955 DATED 11.04.1955 REGARDING DEPARTMENTAL ATTITUDE TOWARDS STATED THAT THE CB DT IN ITS CIRCULAR NO. 14(XL35) OF 1955 DATED 11.04.1955 REGARDING DE PARTMENTAL ATTITUDE TOWARDS STATED THAT OFFICERS OF THE DEP ARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIG HTS. IT IS ONE OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONAB LE WAY PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TA XPAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICA TE THAT SOME REFUND OR RELIEF IS DUE TO HIM. IT IS FURTHER STATED THAT OFFICERS SHOULD WHEN REQUESTED FREELY ADVISE ASSESSEES THE WAY IN WHICH ENTRIES SHOULD BE MADE IN VARIOUS FORMS THEY SHOULD NOT THEMSELVES M AKE ANY IN THEM ON THEIR BEHALF. WHERE SUCH ADVICE IS GIVEN IT SHO ULD BE CLEARLY EXPLAINED TO THEM THAT THEY ARE RESPONSIBLE FOR THE ENTRIES MADE IN ANY FORM AND THAT THEY CANNOT BE ALLOWED TO PLEAD THAT THEY WERE MADE UNDER OFFICIAL INSTRUCTIONS. ITA NO.743/RJT/2010 14 17. IN VIEW OF THE ABOVE DISCUSSION WE HOLD THAT T HERE WAS NO CASE WITH THE ASSESSING OFFICER FOR IMPOSITION OF CONCEA LMENT PENALTY FOR THE ASSESSMENT YEARS UNDER CONSIDERATION AND THE LEARNE D CIT(A) WAS JUSTIFIED IN CANCELING THEM. 18. IN THE RESULT APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON ____________ ____. (A.L. GEHLOT) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT : DECEMBER 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IV RAJKOT 4. THE CIT-III RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT