TaxTMI 
TaxTMI 
2008 (1) TMI 472
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....the course of assessment proceedings, the Assessing Officer noted that the assessee debited a sum of Rs. 7,26,613 under the head 'Commission'. The Assessing Officer required the assessee to file the details from which it was noted by the Assessing Officer that out of total sum of commission so paid, a sum of Rs. 7,22,740 pertained to Kanpur office while Rs. 3,873 pertained to Delhi Office. The Assessing Officer required the assessee to justify the claim in respect of commission. The assessee submitted a list of persons along with the addresses to whom commission was claimed to have been paid by him during the year on sale of machines. The Assessing Officer then sent his inspector to verify the addresses and payment. The inspector reported that most of the addresses are correct but the persons whose names are mentioned could not be contacted on account of they being out. In this regard it would be useful to refer the relevant part from the order of the Assessing Officer as under: "The inspector who was assigned the inquiry reported that though the assessees of most of the persons appearing in the details as filed by the assessee were found correct but none of them could be contac....
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....r. Further they did not to come to income-tax office because of the fear. It is with this condition that the penalty proceedings will not be initiated, the commission payment was surrendered. This explanation of the assessee is dated 25-6-2004. The Assessing Officer, however, disbelieved on the explanation and levied the penalty under clause (B) of Explanation I to section 271(1)(c) by holding that explanation furnished by the assessee is not substantiated. He accordingly levied a penalty of Rs. 2,53,000 being the minimum. 4. The learned CIT(A), on the other hand, confirmed the penalty by holding as under: "I have considered the arguments of learned AR and gone through the observation of the Assessing Officer. I have also perused the case laws as relied upon by learned AR. I find that the Assessing Officer had made the spot inquiry through the Inspector of Income-tax about the recipients of the commission. I further found that the Assessing Officer provided an opportunity to the appellant to produce the said recipients for examination but they could not be produced despite specific direction. There is no evidence which can suggest that the recipients of the commission were ev....
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....----------------- 3. 1998-99 1999-2000 22,558,471.68 1,127,580.50 5.00 ------------------------------------------------------------ 4. 1999-2000 2000-01 23,895,741.63 713,630.50 2.99 ------------------------------------------------------------ 5. 2000-01 2001-02 24,428,714.19 726,613.00 2.97 ------------------------------------------------------------ 6. 2001-02 2002-03 54,588,982.77 873,434.00 1.60 ------------------------------------------------------------ 7. 2002-03 2003-04 44,238,007.61 847,400.00 1.92 ------------------------------------------------------------ 8. 2003-04 2004-05 72,704,822.00 784,423.00 1.08 ------------------------------------------------------------ 9. 2004-05 2005-06 100,589,711.12 ....
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....o mentioning without there being any material on record. In fact the Assessing Officer has not given such finding either in the assessment order or in the penalty order. The Assessing Officer has levied the penalty on the basis that the assessee has furnished inaccurate particulars of income as he has not substantiated his claim. 7. The appeal is late by 222 days. The learned A.R. has filed an affidavit and prayed for condonation of delay. He had submitted that the appeal could not be filed in time because the order of the Commissioner received by the assessee was sent to his Chartered Accountant Sri J.P.S. Bhatia, who gave it to Sri J.P. Gupta, F.C.A. for preparation of the appeal as he is senior. The appeal papers were misplaced then prosecution notice was received by the assessee then the papers for appeal were searched and then appeal is filed. 8. The learned D.R., on the other hand, submitted that there is no evidence that appeal papers were misplaced. There is no reasonable cause for not filing the appeal in time. Therefore, the appeal should not be admitted. 9. On merit, the-learned D.R. submitted that case of the assessee falls under clause (B) of Explanation I of ....
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....tive material so as to indicate the assessee had concealed particulars of income or had filed inaccurate particulars. In the present case even though the Assessing Officer has carried out inquiries, there is nothing on record to show that claim of expenditure by way of commission was bogus. Mere inference on presumption basis as drawn by the CIT(A) is not proper. 12. The claim of the revenue is that the case of the assessee squarely falls under Explanation 1(B) of section 271(1)(c). For the sake of convenience, we reproduce Explanation 1 to section 271(1)(c) as under: "[Explanation I-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the [Assessing] Officer or the [Commissioner (Appeals)] [or the Commissioner] to be false, or (B) such person offers an explanation which he is not able to substantiate [and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him], then, the amount added or disallowed in computi....
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....e penalty is levied only on the ground that the assessee failed to produce the artisans. It may sufficient for addition, but in our considered view this cannot be the sole reason for coming to the conclusion that the assessee had filed inaccurate particulars. 14. Now we come to various decisions referred to by the parties. The learned D.R. has first referred to the decision of the Hon'ble Supreme Court in Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519. This is on the issue of satisfaction which is not in dispute in the present case. Next authority referred to by the learned CIT, (DR) is the decision of the Hon'ble Kerala High Court in CIT v. D.K.B. & Co. [2000] 243 ITR 618. It is held therein that even where assessee agrees to addition with the condition that no penalty be imposed, as in the present case, the department is still not precluded from penalty proceedings. The Tribunal had cancelled the penalty on above ground and, therefore, Hon'ble Kerala High Court remanded the matter back to the Tribunal to consider the explanation of the assessee and decide the issue on merit. The learned D.R. then referred to the decision of the Hon'ble Kerala High Court in Anand Liquors' case. ....
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....under a wrong head, he can be said to be furnishing inaccurate particulars of income. The particulars of income can be made inaccurate in a variety of ways, a glaring illustration of which would be where the assessee while stating the income under a particular head, works out the income chargeable to tax after making deductions which are falsely made. Such a process would make the particulars of income inaccurate. In all such cases where the income is not disclosed against the constituent item of the return in which it falls or is partly not disclosed, or the particulars of income given in the return are incorrectly stated by any machination, the impact is bound to be on the figure of gross total income to be mentioned under various heads of income and also on the total income chargeable to tax. In fact, reducing the figure of income that would be chargeable to tax would be the purpose of concealment of particulars of income or giving inaccurate particulars of income. The expression "particulars of income" would have relevance to all the particulars of income which the assessee is required to give in his return fully and truly including the particulars of income chargeable to tax u....
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....of the claim is not sufficient for the purposes of the penalty. 17. Now we come to the authorities referred to by the learned A.R. First authority referred to is the decision of the Hon'ble Gujarat High Court in National Textiles' case. It is held therein that mere addition made under section 68 by not finding explanation from the assessee would not justify the penalty under section 271 (1)(c). This authority pertains to the assessment year 1974-75. The Explanation 1 was introduced in the statute book by the Taxation Law (Amendment) Act, 1975 with effect from 1-4-1976. Accordingly, this authority is not relevant in the present case. Next authority referred to by the learned A.R. is a decision of the Hon'ble Madras High Court in Jankiram Mills Ltd.'s case. This authority is not on concealment of income but merely refers to the decision as to whether certain expenditure is of capital or revenue in nature. This decision is overruled by the Hon'ble Supreme Court in the case of CIT v. Sarawana Spg. Mills (P.) Ltd. [2007] 293 ITR 201 and it does not relate to levy of penalty. It has no help to the present case. Last authority referred to by the learned A.R. is the decision of the Hon'....
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....(Appeals). On further appeal: Held, dismissing the appeal, that the one and only reason for the assessee to file the revised return was that it was not able to produce the proper vouchers for the expenses incurred. The primary burden of proof was on the revenue. The books of account revealed that the expenses were incurred by the assessee but the only incapacity on the part of the assessee was that it was not able to produce proper vouchers for the expenses incurred and that would not amount to concealment of income. The imposition of penalty under section 271 (1)(c) was impermissible." In our considered view the facts in this case are closely similar to the facts of the present case. Hon'ble Madras High Court held that if the assessee is not able to produce proper vouchers for the expenses incurred then it would not amount to concealment of income. 18. Another authority relevant for our purpose and as referred to by the learned A.R., is decision of the Hon'ble Allahabad High Court in Bharat Rice Mills' case. In that case certain share of levy sugar was found not included in the closing stock on the last date of previous year relevant to the assessment year 1981-82. When t....
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....1981. The Income-tax Officer further noticed that the assessee had undertaken hulling of Government paddy during the previous year relevant to the assessment year 1981-82 and had received 433.04 quintals of K. rice, as its own share out of the Government rice hulling. This share of the assessee was shown in the levy register of the relevant previous year, but was not included in the closing stock on the last date of the previous year relevant to the assessment year 1981-82. When the assessee was confronted with the aforesaid facts, the assessee filed a revised return of income for the assessment year 1981-82 including the value of the undisclosed G. rice and the assessee's share of K. rice received on account of Government hulling. Reassessment was completed including the value of aforesaid stock at Rs. 37,548. While completing the reassessment, the Income-tax Officer issued penalty notice to the assessee in terms of section 271 (1)(c). It was explained on behalf of the assessee before the Income-tax Officer that "non-disclosure of closing stock of G. rice was not intentional and it was only a mistake by the accountant not to have included it in the closing stock". Similarly regard....