TaxTMI 
TaxTMI 
2010 (6) TMI 522
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....ogus purchases of Rs.3,75,984 the assessee claimed that these purchases are made from M/s Chandrakala Prints for Rs.1,92,036/- and from M/s Neminath Silk Mills for Rs. 1,83,948/-. Payments were claimed to have been made through account payee cheques. The AO enquired by issuing letters under section 133(6) to the said parties but these parties failed to respond. Even though the assessee furnished copies of account of these parties in his books but no bill or vouchers were filed as evidence. The AO carried out further enquiries from the bank and traced the cheques issued by the assessee to the bank account of Shree Sai Tex and Mann Traders. On examination of these accounts it showed that cash had been withdrawn immediately after cheques were deposited. The AO required the assessee to furnish explanation but no explanation was furnished by the assessee. Accordingly the AO treated these purchases from M/s Chandrakala Prints and M/s Neminath Silk Mills as bogus and amounts paid by crossed cheques was received back by the assessee and accordingly the addition was made in the total income. 3. In respect of unsecured loan the AO noticed that assessee has raised loans of Rs.1,35,000/- an....
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....are of the considered opinion that ld. CIT(A) is not justified in confirming the addition made by AO and accordingly that addition made by the AO is hereby deleted." (ii) Addition in respect of bogus gifts (at pages 6-7 of the Tribunal's order) "90. We have heard the rival submissions and the materials placed on record. After carefully going through the observations of the AO and the arguments of ld. AR, it is seen that all the donors who made gifts to assessee's minor sons are found to be parties of no means by the ld. AO. It is also seen that AO has made inquiry by deputing the ward inspector and it was found that the donors were not residing at the addresses given by the assessee. It is also apparent on the perusal of the return of income filed by various donors that they have filed their returns showing meager income which is just above the amount not chargeable to tax. It is also seen that assessee has failed to produce the donors before AO and thus we do not find any reason to interfere with the findings of CIT(A) and accordingly the addition is confirmed. The ground No.2 of assessee's appeal is dismissed." (ii) In respect of bogus expenses (at....
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....sitions :- "Penalty-Concealment of income-Amount allegedly invested in purchase of commodity and profit on its sale outside the books of account- Addition made to income on the ground that the amount represented unexplained investment and also suppressed profits on sale outside books of account-No evidence that explanation regarding purchase was false- Addition deleted in quantum proceedings-Penalty could not be levied- Income-tax Act, 1961, s. 271(1)(c)." 8.3 In City Dry Fish Company v. Commissioner of Income-tax (1999) 238 ITR 0063 (A.P.) it has been held, (i) that the points had been decided straightaway instead of directing the case for reference and then ordering the reference, which will take another decade; and (ii) that, in the instant case the order of the Tribunal was to the effect that the sum of Rs.85,622/- pertained to the year previous to the assessment year 1980-81 and was available as reserve and, as such the order of the Income-tax Officer clubbing that amount of Rs.85,622/- as the income for the assessment year 1980-81 stood set aside. As a necessary corollary, the levy of penalty on the above component also had to be set aside. 8.4 In CIT vs. Mohd. Bux S....
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....urnish an explanation before the AO in response to show cause notice, issued by him before levy of penalty. The case of the assessee is also covered in terms of Explanation -1(B) if we treat that explanation furnished by the assessee during the course of assessment proceedings as the explanation assessee could have furnished in response to show cause notice before levy of penalty. The explanation was that assessee's minor sons have received gifts in cash which was deposited in the bank account and money was then transferred to the assessee as loan from minor sons. This explanation is not substantiated inasmuch as necessary evidence in respect of the claim has not been filed. The identity of the donors and their creditworthiness were not explained before the AO. If assessee would have discharged the primary onus then there would not have been any case for holding that assessee has not substantiated his explanation. But in a case like this, where assessee chose to sit quietly and did not furnish any satisfactory explanation about cash deposited in minors account which is finally transferred to assessee's account, then it could not said that assessee has discharged the primary onus ly....
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....r Asst. Year 2002-03. He submitted that Taxation Laws Amendment Act, 1975 w.e.f. 1.4.1976 inserted new Explanation-1 which is altogether different in putting the onus and satisfaction of ingredients. Therefore, the decision of Hon. Gujarat High Court in these two cases would not be applicable for the assessment for Asst. Year 2002-03. 12. In order to examine the above contention we refer to Explanation - 1 to section 271(1)(c) which existed prior to Taxation Laws Amendment Act, 1975, which reads as under :- "Explanation to sec. 271(1)(c) prior to 1.4.76 as applicable to A.Y. 1971-72 Explanation.--Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or willful neglect on his part, be deemed to have concealed the ....
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....terpreted particularly in the above two judgments, that the onus still remained on the Revenue to prove that there was an act of contumacious conduct or animus while not returning correct income. 14. By introducing Explanation -1( as existing prior to 1.4.1976) by Finance Act, 1964, the burden of proving that omission to disclose true income did not proceed from any fraud or gross or willful neglect was put on the assessee. It provided that where income returned by any person is less than 80% of the amount of the income assessed on regular assessment (including re-assessment u/s 147 of the Act) as adjusted by bona fide claim of an expenditure which has been disallowed in the assessment, the assessee has to prove that failure to return correct income 12 did not arise from any fraud or from any gross or willful neglect on his part. If it is not so proved then such difference (as adjusted by bona fide claim of expenditure disallowed) would be deemed concealment of income or deemed as income in respect of which assessee has furnished inaccurate particulars. However, it was experienced by Wanchoo Committee that appellate authorities were not inclined to uphold the penalties imposed o....
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....al 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 to be false, or (B) such person offers an explanation which he is not able to substantiate, 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 respect of which particulars have been concealed: Provided that nothing contained in this Explanation shall apply to a case referred to in clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him." 15. The new Amendment by Taxation Laws (Amendment) Act, 1976 inserting Explanation-1 to section 271(1)(c) provided that where in respect of facts material to the computation of the total income of the assessee he furnishes no explanation o....
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.... in clause (B) of this Explanation is as under :- "The Amending Act in clause (B) of this Explanation has substituted for the words "not able to substantiate", the words "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". Further, the proviso making the existing Explanation inapplicable to a case where in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person if the explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him, has been cast on the person who has committed the default." 16. With these amendments, the new Explanation-1 which is existing as at present and is also applicable for Asst. Year 2002-03, came out to be what we have reproduced in para above. 16.1 Clause (A) of Explanation-1 remained the same as it was made by the Amendment Act, 1976 but clause (B) of Explanation-1 created three ingredients to be satisfied simultaneously and cumulatively for deeming the additio....
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....arat High Court has also held that where there is an amendment in the Act then judgment given on the basis of earlier provision of law would not create a binding precedence. Following are the judgments :- (i) Roshanlal S. Jain vs. DCIT (Asst) (2009) 309 ITR 0174 (Guj) In income-tax matters which are governed by an all-India statute, when there is a decision of a High Court interpreting a statutory provision, it would be a wise judicial policy and practice not lo take a different view However, this is not an absolute proposition and there are certain well-known exceptions to it In cases where a decision is sub silentio, per incuriam, obiter dicta or based on a concession or takes a view which it is impossible to arrive at or there is another view in the field or there is a subsequent amendment of the statute, or reversal or implied overruling of the decision by a High Court, or some such or similar infirmity is manifestly perceivable in the decision, a different view can be taken by the High Court. (ii) Arvind Boards and Paper Products Ltd. vs. CIT (1982) 137 ITR 0635 (Guj) It is settled law that if two interpretations of a taxing provision are possible,....
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....s not explained as to why he was unable to produce the donors or give their correct addresses. Unless the circumstances which created inability in the assessee to disclose the material facts necessary for assessment or to substantiate the explanation furnished by him are elaborated and convincingly established, explanation of the assessee cannot be treated as bona fide. Thus penalty is leviable within the meaning of Explanation- 1(B) to section 271(1)(c) in respect of alleged gifts received by the minor sons of the assessee which finally found transferred to the assessee's books. 19. However, in our considered view penalty would not be leviable in respect of addition of Rs.40,154/- being brokerage expenditure in respect of which it was held that genuineness of the expenditure is not established and that they are not fully verifiable, payments were made in cash and were supported by self-made vouchers and there was no evidence of services rendered. The claim is clearly unsustainable and, therefore, addition was confirmed by the Tribunal but for making unsustainable claim penalty cannot be levied as held by Hon. Supreme Court in CIT vs. Reliance Petro Products 322 ITR 158 (SC) as ....