TaxTMI 
TaxTMI 
1999 (9) TMI 133
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....CIT (Appeals) to Rs. 26,65,960 thereby deleting certain additions made by the Assessing Officer. The Assessing Officer imposed penalty under section 271(1)(c) by treating certain additions mentioned in the penalty order as concealed income. In first appeal, however, the CIT (Appeals) confirmed the penalty with regard to addition of Rs. 1,32,000 and Rs. 1,02,000 only. The assessee being aggrieved, filed the appeal before the Tribunal. 3. During the course of assessment proceedings, the Assessing Officer found that the assessee has claimed deduction of Rs. 94.05 lakhs on account of payment of royalty to the Arunachal Pradesh Relief and Welfare (Charitable) Society. As per clause 5 of the agreement the amount of royalty to be paid was Rs. 85.80 lakhs per annum and an excess of 11% of the face value of the tickets printed in excess of 15 lakhs tickets per week. The Assessing Officer worked out the guaranteed royalty to Rs. 1.65 lakhs per draw. The 25th draw was cancelled on the request of the assessee as the Tamilnadu Government has levied sales tax on the sale of lottery tickets as well as on account of the practical difficulty, the assessee requested the Arunachal Pradesh Governme....
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.... Rs. 21,000 v. M/s. Sanjay Agency, Hyderabad. Rs. 20,000 vi. K.V. John, Calicut Rs. 20,000 &nbs....
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.... dispute. The addition of Rs. 1,32,000 made by the Assessing Officer was in dispute. During the course of hearing the assessee was asked to explain how the liability of Rs. 1,32,000 was under dispute against the assessee which was included in the total income and Rs. 2.97 lakhs claimed as deduction by the assessee. As regards, the deposit of Rs. 1,02,000 in the name of certain persons, the assessee has not produced any evidence to prove the genuineness of the deposits, it is stated by the assessee's counsel that the assessee is unable to get the correct address of the parties who deposited the amount and failure to get correct address should not be taken into account. According to him, the whole matter was placed before the Assessing Officer. It is also stated by the ld. counsel for the assessee that the amount of Rs. 1,32,000 was not paid but shown as income in the assessment year 1988-89. 7. The learned Departmental Representative, argued that the assessee has failed to substantiate any explanation regarding the addition of Rs. 1,02,000 and therefore penalty is leviable on the assessee. In view of Explanation 1 to section 271(1)(c) of the Act, he referred to the order of the C....
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....refore, penalty under section 271(1)(c) cannot be imposed with regard to the amount of Rs. 1,32,000. 9. The Assessing Officer made an addition of Rs. 1,02,000 as the assessee did not produce any evidence or correct address of the concerned parties to prove that the deposits have been received from them, during the appeal before the CIT(A) or during the course of penalty proceedings either before the CIT(Appeals) or before the Assessing Officer. Under Explanation 1 to section 271(1)(c) if a person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false, then the amount added or disallowed in computing the total income of such persons as a result thereof shall be deemed to represent the income in respect of which particulars have been concealed. 10. For the sake of convenience, Explanation 1 to section 271(1)(c) is reproduced below:- "Explanation 1: 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 Income-tax Officer or the Appellate Assistant Commissioner [or the Commissi....
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....nt as assessee's income from undisclosed sources by the application of section 68 of the Act. Proceedings under section 271(1)(c) were initiated in respect of the said addition. The addition made by the ITO was sustained by the AAC. The ITO imposed penalty of Rs. 10,000 under section 271(1)(c) after rejecting the assessee's explanation. It was claimed by the assessee before the ITO that the creditor having admitted the advance of loan, the burden placed on it has been discharged and therefore, no case for imposition of penalty was made out. The matter was carried in appeal before the AAC, who held that imposition of penalty was not in order. The Revenue appealed to the Tribunal and the Tribunal disposed of the appeal concurring with the conclusion of the AAC. The AAC has held that the notice did not specifically mention whether there was concealment or whether inaccurate particulars of income had been furnished by the assessee and that invalidated the notice. It was also held by the AAC that the assessee had discharged the primary onus laid down upon it and in the absence of any proof contrary to the probabilities raised by the assessee, penalty cannot be imposed. In further appeal....
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.... gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessing Officer as to whether he can invoke the Explanation or not. Explanation I which primarily concerns the case at hand, automatically comes into operation when, in respect of any facts material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the total income is deemed to represent the income in respect of which particulars have been concealed. As per the provisions of Explanation 1, the onus to establish that the explanation offered was bona fide and all facts relating to the same and material to the computation of his income have been disclosed by him will be on the person charged with concealment. Mere failure to substantiate the explanation is not enough to warrant penalty. The Revenue has to establish that the explanation offered was not substantiated. The provision of Explanation 1 is c....
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....ptuous conclusion that the assessee may have succeeded in the appeal had it come before the Tribunal against the addition. No basis or reason has been indicated for such conclusion. A narration of facts would go to show that the AAC and the Tribunal did not consider the case of the assessee keeping in view the new Explanation 1 applicable on and after April 1, 1976. By operation of the Explanation, the onus lay on the assessee and findings given at the time of assessment are relevant and have probative value where the assessee offered nothing beyond the explanation offered at the assessment stage. In such cases, it cannot be said that the assessee had discharged the onus given by a preponderance of liabilities. The initial burden which lay on the assessee was not discharged. There was total absence of material to rebut the presumption. The assessee's plea does not stand the test of preponderance of probabilities." Therefore, in the above case the Hon'ble Orissa High Court had laid down the following proposition of law: 1. Explanation to section 271(1)(c) is the rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. 2. The initial burden of....
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....f in the process of that difficult decision. However, mere filing of a revised return by the assessee at any time prior to the Department cornering the assessee in relation to a particular concealed income, would not be sufficient to exonerate the assessee from the penal consequences. The mere fact that investigation by the Department is a foot, though nothing tangible had come into the possession of the Department at any particular point of time, may induce a dishonest assessee to submit a revised return. Such an exercise will not absolve him of the consequences flowing from an act which on his part had already been completed, namely, the concealment of income or the particulars thereof. Conversely, it may so happen that an assessee realises the error or omission in his original return, when the assessment proceedings including investigation by the officials of the Department, had progressed to a considerable stage; if the omission or error in the submission of the first return is honest and bona fide, the fact that the submission of the revised return is belated, and after investigation had advanced much, by itself, will not visit him with penal consequences. The assessment of....