TaxTMI 
TaxTMI 
2010 (5) TMI 583
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....tel expenses incurred for business purpose Rs. 90,000/-" After making these additions, Assessing Officer also initiated penalty proceedings u/s.271(1)(c) of the Act. 4. During the course of assessment proceedings on verification of Schedule attached to the balance-sheet credit balance of Rs.7 lakh was noticed. It was the sum claimed to have been received from M/s. Shree Corporation against order for supply of polyester textured yarn to be imported from Singapore. It was submitted that market subsequently declined. Therefore that party refused to take the goods at the pre-determined price. The assessee did not furnish details like confirmation from that other party and period corresponding to purchase of yarn, or placing of order or dispute for recovery. Accordingly, he proposed an addition of Rs.7 lakh u/s.68 of the Act which was finally not disputed and accepted by the assessee. Similarly addition of Rs.90,000/- made after disallowing total expenses claimed to be incurred on business promotion was confirmed because assessee failed to produces necessary evidence. In the penalty proceedings, assessee furnished following explanation:-"1.11.1 Both additions have been ma....
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....that assessee did not show as to who stayed in the hotel, what was the nature of expenditure, whether any meeting were conducted in the hotel and who attended such meeting. Thus, business purpose of the expenditure was not established. 6. Before us Ld. AR submitted that assessee-firm is in liquidation as total loss is over Rs.85 lakh during this year. In view of this, the creditor and the broker have not bothered to file any claim against the assessee. In fact non-furnishing of documentary evidence would be sufficient for making addition but for levy of penalty, the Assessing Officer has to show that impugned addition was in fact income of the assessee. Ld. AR further submitted that the explanation furnished by the assessee was bona fide for both the items of additions. The Assessing Officer did not find any evidence of concealment and both the additions were made purely on presumptive basis. The assessee had furnished copy of ledger account of the credit or in the books of the assessee showing the details. The order was orally received through broker. That party was not in direct contact with assessee, thus the assessee was prevented by reasonable cause from furnishing the conf....
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.... doubted was the business purpose of the expenditure. We derive support from the decision of Hon'ble High Court in the case of CIT v. Reliance Petrolium Products (2010) 322 ITR 158 (SC). In view of this, we cancel the penalty in respect of addition of Rs.90,000/-. 9. However, same cannot be said about the addition of Rs.7 lakh. Even though onus of the assessee during the assessment proceedings is confined to submitting evidence regarding identity of the creditor, creditworthiness of the creditor and genuineness of the transaction. However, in penalty proceedings it is not the case that entire burden is on the Department to show that what was added was in fact concealed income of the assessee. Explanation to Sec.271(1)(c) provides for deeming addition as concealed income or income in respect of which inaccurate particulars have been furnished provided conditions laid down in either of the clauses are satisfied. If assessee does not furnish any explanation, in respect of addition made, or explanation furnished is found false, then clause (A) of Explanation-I can be invoked. Where assessee furnishes an explanation in respect of addition made, then as per Clause (B) of Explanation-I....
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....e assessee in the quantum proceedings which he could not substantiate in those proceedings was (i) bona fide and (ii) he had disclosed all the facts relating to the same and material to the computation of his total income. In cases where explanation was offered, but was rejected as it could not be substantiated by the assessee, there would arise no presumption of concealment of the particulars of income that was added or disallowed if such assessee can show that the said explanation offered by him was a bona fide one and that he had disclosed all facts relating to such explanation and material to the computation of his total income during the quantum proceedings. For bringing the case under the main provision the onus is put on the Department to prove that the assessee has concealed the particulars of his income or furnished inaccurate particulars thereof. To bring the case of the assessee within its mischief, mere rejection of assessee's claim would not be sufficient and the assessee cannot be held guilty of concealment. It is by virtue of explanation that Assessing Officer can raise the presumption about additions made to the total income or deduction disallowed that it represent....
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....in the explanation. Thus, explanation furnished by the assessee cannot be said to be substantiated. It is apparently vague, fanciful and without any foundation or basis. In respect of second condition, in explanation-1(B), we are of the view that explanation furnished by the assessee is not bona fide. Assessee explained that money was received from a purchaser. It was further claimed that it was received through a broker and for import of material. In addition to this, it was further claimed that due to change in market rate of the goods the purchaser refused to accept stock for which the order was placed by him. This explanation is bundle of contradictions leading to the belief that it is false. There is no evidence that the assessee really made any attention to import any goods from Singapore. The details of the goods for which order was placed were not furnished, the rates at which goods were sought to be purchased are not provided. The details that market has changed to the detriment of the purchaser are also not provided. Any correspondence from purchaser regarding refusal to purchase the goods as per purchaser's order was also not provided. The detail as to amount of loss eit....