TaxTMI 
TaxTMI 
2009 (10) TMI 616
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....er cent as against 14.80 per cent in the preceding year. To a query by the AO, the assessee explained that in the preceding year, the assessee was working with ONGC, Ankleshwar and doing road maintenance work while in the year under consideration apart from ONGC he constructed houses for backward classes, resulting in fall in gross profits. On scrutinizing the comparative details of expenses, the AO noticed that the assessee debited an amount of Rs. 13,81,645 on account of cartage expenses. To a query by the AO, the assessee submitted the details of the said expenditure, which included payment of Rs. 4,68,305 to Shree Jalaram Transport of Ankleshwar. The assessee also submitted xerox copies of the bills issued by the said transport firm. On perusal of these bills, the AO found that there were no signatures on any of the seven bills issued by the said transporter nor the assessee could submit any confirmation or produce the proprietor of the firm before the AO, the said transport firm having closed. A notice under s. 133(6) of the Act sent though RPAD to M/s Shree Jalaram Transport was returned by the postal authorities with the remark "left". Accordingly, the AO concluded that the ....
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.... Jalaram Transport Co. to use their shop for transport business and did not charge any rent or electricity charges. It was contended that the addition was upheld by the learned CIT(A) not because of falsity of material evidence but due to misconception of facts like payment by account payee cheques where no bank account was maintained by the transporter. The said transporter had maintained only one vehicle viz. tempo. It was further contended that explanation of the assessee was bona fide and, therefore, no penalty should be levied. However, the AO rejected these contentions of the assessee since even after remand of the matter to the AO, the assessees could not substantiate his claim nor replied as to why the alleged bills issued by the said transport firm were unsigned. While distinguishing the decisions relied upon by the assessee in the case of Jumabhai Premchand (HUF) vs. CIT (2000) 161 CTR (Guj) 38 : (2000) 243 ITR 812 (Guj), CIT vs. Mussadilal Ram Bharose (1987) 60 CTR (SC) 34 : (1987) 165 ITR 14 (SC) : TC 50R.474, National Textiles vs. CIT (2000) 164 CTR (Guj) 209 : (2001) 249 ITR 125 (Guj) and CIT vs. Ajaib Singh & Co. (2001) 170 CTR (P&H) 489 : (2002) 253 ITR 630 (P&H), t....
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....ar. To a query by the AO, the assessee produced xerox copies of seven unsigned bills of the said firm. On perusal of these bills, the AO found that there were no signatures on any of the seven bills issued by the said transporter nor the assessee could submit any confirmation or produce the proprietor of the firm before the AO, the said transport firm having closed. A notice under s. 133(6) of the Act sent though RPAD to M/s Shree Jalaram Transport was returned by the postal authorities with the remarks "left". Therefore the AO disallowed the amount. On appeal, claim was made that payment to Shree Jalaram Transport was made by account payee cheques while the learned CIT(A) found that the said transport firm did not have any bank account. Though the assessee initially stated that no rent or electricity bills were paid for the office by the said transport firm, later it was stated that a rent free office was taken and even electricity bills were paid by the owner. In the absence of any evidence of genuineness of the said expenditure, addition was upheld. On further appeal, the Tribunal also upheld the addition since neither anyone from M/s Shree Jalaram Transport came forward to conf....
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....85 ITR 49 (SC) : TC 50R. 795, Addl. CIT vs. Jeevan Lal Sah (1994) 117 CTR (SC) 130 : (1994) 205 ITR 244 (SC) : TC 50R.973 and KP. Madhusudhanan vs. CIT (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC), it is well-established that whenever there is difference between the returned and assessed income, there is inference of concealment. The Expln. 1 to s. 271(1)(c) of the Act raises a presumption that can be rebutted by the assessee with reference to facts of the case. Thus, the onus is on the assessee to rebut the inference of concealment. The absence of explanation itself would attract penalty. The explanation offered by the assessee should not be false. The onus laid down upon the assessee to rebut the presumption raised under Expln. 1 would not be discharged by any fantastic or fanciful explanation. It is not the law that any and every explanation has to be accepted while mere offer of income by the assessee cannot justify cancellation of penalty. Since the explanation of the assessee that the payment was made to Shree Jalaram Transport by account payee cheques has not been substantiated nor found to be bona fide, rather it was found to be false by the learned CIT(A) and the Tribu....
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....rules of interpretation contemplate a strict interpretation rather than a liberal and wider interpretation. The breach of civil obligation which attract a penalty under the provisions of an Act would immediately attracts the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman, SEBI vs. Shriram Mutual Fund (2006) 131 Comp Cases 591 (SC) : (2006) 5 SCC 361. This view has been reiterated by the Hon'ble Supreme Court in their decision dt. 29th Sept., 2008 in the case of Union of India & Ors. vs. Dharamendra Textile Processors & Ors. in Civil Appeal Nos. 10289-10303 of 2003. 7.3 Hon'ble Allahabad High Court held in the case of Sang am Enterprises vs. CIT (2007) 288 ITR 396 (All) that: "Having given our anxious consideration to the contention raised by Shri Mahajan, we find that after the insertion of Expln. 1 to s. 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 penal....
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....rt in the case of CIT vs. Nathulal Agarwala & Sons (1985) 47 CTR (Pat)(FB) 258 : (1985) 153 ITR 292 (Pat)(FB) : '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, the burden placed upon him would be discharged and the presumption rebutted. We agree. We further agree that it is not the law that any and every explanation by the assessee must be accepted. It must be an acceptable explanation, acceptable to a fact finding body. We are aware that it would not be possible for the High Court to enter into a fact-finding exercise or reappreciate the evidence and we do not propose to do so. However, at the same time, it is apparent that the burden which is cast on the assessee remains undischarged when one applies the principles laid down by the apex Court. As observed, the explanation has to be one which is not fantastic or unacceptable. It is not the law that any and every explanation by the assessee must be accepted.............'." 7.6 In the case under consideration explanation given by the assessee....
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....also been found to be a probable explanation by the Tribunal. After recording the aforesaid findings, the Tribunal held that the explanation given by the assessee in respect of the above points raised by the assessing authorities is such that the balance of probabilities is in favour of the assessee and insofar as the discrepancies in the books of the seller are concerned, that was a matter for the said firm to explain and for that the assessee could not be said to have committed any default so as to be visited with penalty. In these circumstances, Hon'ble High Court concluded that the Tribunal was justified in deleting the penalty imposed by invoking the provision of s. 271(1)(c) read with the Explanation thereto. How this decision is of any assistance to the assessee, has not been demonstrated before us. Merely citing a decision, without explaining as to how the decision is applicable to the facts of the case under consideration, would not help the assessee. Apparently the said decision was rendered on its own facts and is not applicable to the facts of the case under consideration, wherein explanation of the assessee itself has been found to be false. Likewise reliance on th....
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....Shree Jalaram Transport did not exist at all and treated the cartage expenses paid to said party as not genuine. Secondly the party was not produced. The copies of bills produced did not bear signature. The transporter was not maintaining record etc. 3. It is pertinent to note that with regard to this addition, the assessee filed appeal before the CIT(A) and placed on record the further evidences, which are as under: (i) Affidavit of Shri Mahendra T. Rana, proprietor of Shree Jalaram Transport. (ii) Letter from the owner of the shop regarding the space given to Shree Jalaram Transport. (iii) Certificate from the sm. ONGC branch stating that the payments of Rs. 1,12,000 and Rs. 2,00,000 vide crossed cheque Nos. 780265 and 781634 respectively paid on 1st Jan., 2001 and 29th March, 2001 to Shree Jalaram Transport. (iv) Goods carriage permit. (v) Acknowledgement and computation of income of Shri Mahendra T. Rana. (vi) PAN card of Shri Mahendra T. Rana. (vii) RC book showing tempo registered in the name of transporter. 4. In quantum appeal, the learned CIT(A) called the remand report from the AO. During the course of remand proceedings, the transporter remaine....
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.... in para 7 of the penalty order. On further appeal, the learned CIT(A) confirmed the penalty as per his finding vide para 5 of his order which reads as under: "5. I have considered the submissions. It is seen that the same set of documents were filed before the CIT(A) also during the course of appellate proceedings and after careful examination of the same, the CIT(A) held that the payment allegedly made was not genuine, and therefore, dismissed the appeal. Therefore, it has been clearly held by the CIT(A) that the appellant's claim of having made this payment was not correct and rightly disallowed by the AO. This clearly means that the appellant's case attracts Expln. 1 to s. 271(1)(c) of the Act and as rightly pointed out by the AO, the appellant has furnished inaccurate particulars of income by falsely claiming the said payment to the transporter. In view of this and in view of clear findings of the CIT(A) in the quantum appeal, penalty imposed in this case is hereby confirmed." Aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 7. At the time of hearing, Shri R.B. Shah, learned Authorised Representative of the assessee appeared a....
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....record. He filed the return for the asst. yr. 2000-01 declaring total income of Rs. 54,980. In this return of income he has shown the income from Jalaram Transport under s. 44AE of the IT Act and TDS at Rs. 8,779. Finally the learned counsel of the assessee pleaded that the assessee was negligent of making the payment on unsigned bills through crossed cheques and for this reason the addition was upheld in the quantum assessment, but after making cross verification in remand proceeding penalty under s. 271(1)(c) is not leviable. 9. Shri B.D. Barot, learned Departmental Representative, on the other hand, supported the impugned orders of the authorities below. The learned Departmental Representative submitted that in view of the finding given by the Tribunal in quantum appeal, the penalty levied under s. 271(1)(c) of the Act be confirmed. Apart from this, the learned Departmental Representative submitted that gross profit declared by the assessee is low compared to the last year. This also justifies the addition of Rs. 4,68,305 as well as penalty under s. 271(1)(c) of the IT Act on the said addition because the assessee failed to discharge onus under Expln. 1 to s. 271(1)(c) of the....
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....(SC) 129 : (1972) 83 ITR 215 (SC), Jumabhai Premchand (HUF) vs. CIT. In the present case on hand, the assessee has furnished all the details about the payment of cartage expenses to M/s Shree Jalaram Transport. The assessee produced the owner of Jalaram Transport before the AO who obtained the signature on order sheet. The owner of Jalaram Transport has produced RC book showing tempo for his business registered in his name, goods carriage permit issued in his name, nearly 100 duplicate cash memos/bills issued to various persons including that of the assessee, confirmed the receipt of payments. The assessee has also produced certificate from the SBI that two cheques of Rs. 1,12,000 and Rs. 2,00,000 bearing Nos. 780265 and 781634 respectively paid to Jalaram Transport on 1st Jan., 2001 and 29th March, 2001. The assessee has furnished explanation at the time of assessment, which was not accepted because the assessee could not substantiate the same. But in the penalty proceedings and remand proceedings the assessee has explained with evidences. The presumption of concealment drawn from the language of s. 271(1)(c) r/w Expln. 1 thereto, can be rebutted by an assessee with reference to f....
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....amount of Rs. 13,81,645 was debited on account of expenses which included expenditure of Rs. 4,68,305 paid to Shree Jalaram Transport ("SJT' for short) of Ankleshwar towards transport charges. The AO held that payment of Rs. 4,68,305 was not genuine and therefore disallowed the same. This disallowance was confirmed on appeal by the learned CIT(A) and by learned Members of the Tribunal. The AO had also initiated penalty proceedings under s. 271(1)(c) of the Act. 3. In reply to the above show-cause notice, the assessee contended that the facts and circumstances of the case were not properly appreciated in assessment proceedings in letter dt. 8th Nov., 2004 filed before the AO. A portion of the submissions has been reproduced in the penalty order. The AO held that the contentions advanced even in penalty proceedings were untenable, as the assessee was unable to explain his case. In the remand quantum proceedings, the learned CIT(A) after consideration of remand report and on sound observations had dismissed the appeal of the assessee. Without denying that the assessee had produced evidences store the AO to indicate that the assessee was still in existence and carrying on transp....
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....ectively were paid to "SJT" on 1st Jan., 2001 and 29th March, 2001 was on record. He concluded that the explanation of the assessee was not found to be false. In his view, the basic premise on which the AO imposed penalty was "most important aspect that why the bills issued to the assessee by 'SJT' were unsigned, assessee remained silent", and the same lost its significance for the purpose of levy, once transporter appeared and admitted the issuance of bill and receipt of payment in remand proceedings. The learned JM therefore cancelled the penalty in his proposed order. 7. To resolve the aforesaid differences, the matter was fixed and both parties have been heard. The learned counsel for the assessee, Shri Rasesh Shah drew my attention to the followings evidences produced before the Revenue authorities in support of his claim, which have also been considered by the learned JM in his proposed order: (i) Affidavit of Shri Mahendra T. Rana, proprietor of Shree Jalaram Transport. (ii) Letter from the owner of the shop regarding the space given to Shree Jalaram Transport. (iii) Certificate from the SBI, ONGC branch stating that the payments of Rs. 1,12,000 and Rs. 2....
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....question. It was observed that bank's statement was not clear and that in absence of specific statement of the bank that the cheques were account payee cheques or the payment of........ the amount claimed to be paid to Shree Jalaram Transport cannot be accepted. Accordingly, the order of the CIT(A) was confirmed and addition upheld. 10. In reply to the show-cause notice in penalty proceedings, the assessee claimed that the facts recorded by the Tribunal in its order were not correct. A part of the assessee's reply is reproduced in the penalty order and is as under: "(3) ....The assessee produced the owner of said Jalaram Transport before you during the appellate proceedings where you had to submit RR to Hon'ble CIT(A). You have obtained his signature on order sheet. Moreover, he had produced before you RC book showing tempo for his business registered in his name. Goods carriage permit issued in his name, nearly 100 duplicate cash memo/bills issued to various persons including that of the assessee confirmed the receipt of payments, certificate from the SBI that two cheques of Rs. 1,12,000 and Rs. 2,00,000 bearing Nos. 780265 and 781634 respectively paid to Jalaram....
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....ncealment. Mens rea of quasi criminal offence is not established." Above contentions were held to be untenable and were rejected by the learned CIT(A) in quantum appeal. Therefore, the AO also rejected them. On the question of transporter appearing and accepting the payment, the AO observed that question of unsigned bills was not explained. Accordingly, penalty was levied after rejecting reply of the assessee. On further appeal, the learned CIT(A) has mainly relied upon the facts of dismissal of assessee's quantum appeal. No further fact has been stated to confirm the levy. 11. Before proceeding to comment on the reasons, which influenced the learned AM to confirm the action of Revenue authorities. I would like to make some observations on the statutory provisions and the case laws cited at Bar and noted by the Revenue authorities and learned Members in their proposed orders. It could not be disputed that the penalty can be levied under s. 271 (1)(c) of the Act, if the assessee has "concealed income" or "furnished inaccurate particulars of such income". Various Explanations to provision of s. 271(1)(c) are admitted to be rule of evidence which shifts burden on the assesse....
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....e him. The finding of Tribunal was vehemently challenged. The learned AM has further observed that certificate from bank relating to issue of cheques was rightly rejected. The explanation of the assessee was held to be not bona fide and that the matter was fully covered by Expln. 1 to s. 271 (1)(c) of the Act. The premise on above conclusion was arrived at is not correct. 12. Having considered the facts carefully, I am unable to ascribe to the view taken by the learned AM. The question involved in penalty proceedings was whether the claim of the assessee relating to the deduction of Rs. 4,68,301 towards transport charges in the account of "SJT" was false and therefore the assessee was covered by provision of s. 271(1)(c) of the Act. It is settled law that the findings recorded in the assessment proceedings is not conclusive, although it is entitled to great weight. The penalty proceeding being separate and independent proceedings, the assessee can always show that the finding recorded in the quantum proceeding are neither reliable nor sufficient to impose penalty. This is what the assessee has done in this case. Unfortunately, the stand of the assessee has not been appreciated. ....