TaxTMI 
TaxTMI 
2010 (5) TMI 519
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....g the course of assessment proceedings, the Assessing Officer[AO in short] noticed a wide gap between the receipts shown and the income declared. The AO noticed that even in the earlier years, similar was the position. The relevant details extracted in the order of the AO reveal as under: AY Receipts shown Income declared Exp.-Overtime Leave encashment Messing charges Bonus 1999-2000 20658111 406470 4826909 408970 1586653 1164376 2000-2001 26345298 549460 4758975 450916 2091306 1640572 2001-2002 29089550 636430 5798593 690318 2106545 1388250 3. In the light of aforesaid details of earlier years , during the course of survey, statements of various employees of the assessee were recorded as extracted on page nos.3 to 7 of the assessment order. Shri Subhashbhai Kantilal Dave, cashier in his statements recorded on 24.1.2002 & 25.1.2002 admitted that no books had been written for the year under consideration until the date of survey. The assessee also in his statement recorded on 26.2.2002 admitted that no books of accounts had been written for the year under consideration so far. Shri Kapoorcha....
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..... The AO also did not find any evidence in support of the various expenses incurred. In nutshell, the AO summarised the following discrepancies : vii) In the bonus registers, revenue stamps were affixed and signatures obtained in English, without even mentioning the amount of bonus etc. All the columns in the bonus register were blank; viii) In the case of overtime register, though the amount of overtime was mentioned, but the signatures of the employees and the date on which the amount was paid, were not obtained against any of the entry in the register; ix) In the vouchers for the period 5.9.01 to 11.1.01, in the column of the voucher denoting 'received by' has been signed by a single person in some of the vouchers/bills/receipts. In some of the vouchers there were no signatures on the receipts and in some others, the dates of the vouchers were not written. x) For the wages for May 2001, some of the payments did not bear any signature nor revenue stamp affixed though the salary exceeds more than Rs.1000/-; xi) Similar instances were also noticed for wage bills for period April, June, July, September and November, 2001; xii) ....
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....ly and the same were also not reliable. Accordingly, books of the assessee were rejected and the net Profit was estimated @ 10% of the gross receipts i.e. at Rs.32,48,902/-,resulting in addition of Rs.18,40,137/-. Thus, the assessee suppressed his income by claiming inflated expenses. Had the survey u/s. l33A of the Act not been carried out, the assessee definitely would have evaded the tax on the income of Rs.18,40,137/-. Accordingly, the AO imposed penalty of Rs.5,52,040/- u/s 271(1)(c) of the Act @ 100% of the tax sought to evaded on the aforesaid income since the assessee concealed the income to the aforesaid extent by deliberately furnishing inaccurate particulars thereof. 6. On appeal, the assessee contended that the Settlement Commission, Additional Bench, Mumbai for the AY 1999-2000 to AY 2001-02 in their case directed to assess the income @ 7% of the gross receipts from the security business. It was submitted that not a single deficiency in the books of accounts was pointed out by the AO and that the AO over assessed the income. Moreover, the AO while applying net profit rate of 10% had not given any comparable case. The AO had initiated penalty proceedings for concealm....
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....1 ITR 373, CIT vs. Shivnarayan Jamnalal & Co. , 232 ITR 311(MP), CIT Vs. Reliance Petro Products,322 IT 158(SC), CIT vs. Indian Metal & Ferro Alloys Ltd. ,211 ITR 35(Orissa). The learned DR, on the other hand, supported the impugned orders of the AO and the ld. CIT(A). 8. We have heard both the parties and gone through the facts of the case as also the decisions relied upon on behalf of the assessee. At the outset, we may have a look at the relevant provisions of section 271(1)(c) of the Act, which read as under: "271.Failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (iii) in the cases referred to in clause (c) , in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the fur....
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....ay that it had not concealed the income or there was no fraud or gross or wilful neglect on its part. In the instant case also, the assessee was not maintaining the accounts during the course of the business year after year and in fact, the assessee was writing the accounts after the close of the year and inflating the expenses so as to show the income at his will. In these circumstances, it does not lie in the mouth of the assessee that it was not concealing his income by furnishing inaccurate particulars thereof, as concluded by the AO and the ld. CIT(A). 8.1 As mentioned already, in the case under consideration, during the course of survey, statements of various employees of the assessee were recorded as extracted on page nos.3 to 7 of the assessment order. It was found that books of accounts for the year under consideration year were to be written only after completion of March and even the books of the assessee for the preceding years were written after completion of financial year by way of regular practice. It was also noticed that inflated expenses were debited to accounts under the instructions of Shri Shyourajsingh Chauhan - the assessee even when payment for such expe....
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....ions of Explanation 1 to section 271(1)(c), when the assessee failed to substantiate his own explanation , get attracted. We find that after the insertion of Explanation 1 to section 271(1)(c) of the Act by the Taxation Laws (Amendment) Act, 1975, if the explanation offered by the assessee regarding the additions is either found to be false and remained unsubstantiated, the additions so made are deemed to be the concealed income, and therefore, the penalty provisions are attracted. Hon'ble Supreme Court in the case of B.A. Balasubramaniam & Bros. Co. v. CIT [1999] 157 CTR 556, held that penalty can be imposed even on estimated addition also. Relevant head notes and conclusion as drawn by the Hon'ble Supreme Court are reproduced as under "Penalty under section 271 (1)(c), Explanation - Burden of proof - Difference between income assessed and income returned was more than 20 per cent - Assessee not able to discharge the onus which was on it under the Explanation to section 271(1)(c) - ITO justified in imposing penalty, notwithstanding the fact that income was assessed on estimate basis - CIT v. B.A. Balasubramaniam & Bros. [1984] 40 CTR (Mad.)/[1985] 152 ITR 529 (Mad.) affirmed; CIT ....
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....uthoritative pronouncements, when the assessee failed to discharge the onus laid down upon him in terms of explanation 1 to section 271(1)(c) of the Act, the order of the CIT(A) is upheld to the extent penalty is imposable in this case on the difference between the income worked out @ 7% of the receipts from security services and that returned by the assessee in its profit and loss account. Even otherwise it is a settled law that in economic offences, the statutory liability to pay either duty or tax is nothing but a strict liability where the question of proving beyond the shadow of doubt one's existence of bona fide belief that such duty or interest is not taxable does not arise. It goes without saying that any violation of the law or rules relating to economic offences, either relating to the payment of duty or tax as the case may be, the theory of mens rea is not attracted. In such matters, the rules of interpretation contemplate a strict interpretation rather than a liberal and wider interpretation. 8.31 The rule of mens rea has to be established beyond all reasonable doubt in criminal cases, but it is not so in the case of an economic offence. The classical view that "no m....
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....s not the law that any and every explanation has to be accepted while mere offer of income by the assessee can not justify cancellation of penalty. 8.5 In the case under consideration the desire to conceal is apparent when the assessee was not maintaining the accounts in the course of business and inflated expenses were being debited year after year in the books written well after the close of the year even when payments for such expenses was not being made. The assessee failed to substantiate the expenditure debited in his own accounts. A very heavy onus was placed on the assessee to explain the difference between the assessed income and returned income and the assessee did not substantiate the expenditure debited in his books of accounts at any stage. In view of the foregoing, the decisions relied upon on behalf of the assessee do not support the assessee. The ld. AR on behalf of the assessee merely relied on certain decisions without demonstrating as to how these decisions help the assessee. In Shivlal Tak(supra) rel ied upon on behalf of the assessee , the assessee submitted its return for the assessment year 1978-79 showing total ITA No.523/Ahd/2008 Shyourajsingh B Chauhan ....
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.... on behalf of the assessee on the decision in Shivlal Tak(supra) is totally misplaced. 8.51 Likewise in Shivnarayan Jamnalal & Co.(supra) Hon'ble MP High Court held that that there was no fraudulent attempt on the part of the assessee and the assesse had not withheld or concealed any material or made any deliberate attempt to defraud the authorities. In Reliance Petro Products(supra),penalty was imposed for claiming expenditure on account interest on the loans incurred by the assessee by which amount the assessee purchased some IPL shares by way of its business policies. Hon'ble Apex Court held that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under Section 271(1)(c). In Indian Metal & ferro Alloys Ltd(supra) , the assessee claimed depreciation and development rebate etc., in year before commencement of production. Hon'ble Orissa High Court held that the Tribunal was justified in deleting penalty under s. 271(1)(c) levied for making a wrong claim , the claim being bona fide. As is apparent from the facts in the cited decisions, these decisions are not of an....
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....T,269 ITR 591(Guj), while upholding the levy of penalty, Hon'ble jurisdictional High Court observed that: ".......The Supreme Court in the case of Mussadilal Ram Bharose [1987] 165 ITR 14 has specifically laid down the scope of the Explanation in the following words: "The position, therefore, in law is clear. If the returned income is less than 80 per cent, of the assessed income, the presumption is raised against the assessee that the assessee is guilty of fraud or gross or willful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent." As to what could be the explanation by which the assessee can rebut the presumption raised against it, is stated by the apex court in the same decision in the following words while confirming the view expressed by the Full Bench of the Patna High Court in the case of CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292: "The Patna High Court emphasised that as to the nature of the explanation to be rendered by the assessee, it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given,....