TaxTMI 
TaxTMI 
2013 (9) TMI 1068
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....Act. The confirmation of the penalty by the ld. CIT(A) being perverse against the facts and law deserves cancellation. 3. The order of the ld. CIT(A) is a "Non Speaking Order" is as much as it has failed to take cognizance of the written submissions filed by the appellant, remand report of the Assessing Officer and the rebuttal submissions thereof dated 24.5.2011 filed during the penalty proceedings u/s 271 (1) (c) of I.T. Act and proceedings of the appeal. The ld. CIT(A) has not considered the most relevant documents and submissions. The penalty be annulled/cancelled." 3 After hearing both the parties we find that a search was conducted in the S.L. Arora Group cases. Since the assessee was also a part of that group, a search was conducted in his premises also and the case was transferred to Central Circle-1. In response to the notice the assessee filed return of income declaring Rs. 1,62,653/- as income from commission business and Rs. 1,80,900/- as agricultural income. During the assessment proceedings it was noted that the assessee was having bank account No. 203010100009591 with UTI Bank Sector 8, Chandigarh (now known as Axis Bank). This bank account was not reflec....
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....peal the assessee could not improve upon his case before the ld. CIT(A) who confirmed levy of penalty. 6 Before us, the ld. counsel of the assessee submitted that first of all the assessee was simply doing the business of commission agent or property agent. He was not a proper businessman and therefore, he had filed his return of income only from commission income and in this background there was no requirement for the assessee to disclose the account with Axis Bank. He further submitted that the assessee had given proper explanation regarding amount received before the Assessing Officer. In this regard he referred to various documents filed in the paper book. 7 He submitted that explanation given by the assessee was not found to be false. In any case no enquiries were conducted during penalty proceedings and therefore, in the absence of such enquiry penalty could not have been levied. He also contended that the finding given in the assessment order are not conclusive for the purpose of levy of penalty. He has also made reliance on the following decisions: CIT Vs. Anwar Ali, 76 ITR 696 (SC) CIT v Khoday Eswarsa and Sons, 83 ITR 369 (SC) Anantharam V....
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.... of income, etc.-(1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a) ......................... (b) ........................ (c) has without reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or (d) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (i) ........................ (ii) .......................; (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 twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income." Reading of the above provision would show that this provision was enacted on the similar footing as contained in Section 28(1)(c) of 1922 Act. The expression 'deliberate' was retained in this provisio....
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....on 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." 11 Ld. Author in the commentary on Income Tax Law by Chaturvedi & Pithisaria's (Fifth Edition) has discussed the effects of 1975 amendment at page 8617 to 8620. We are reproducing para 61.8 at page 8619 as under: "61.8 New Explanation 1 provides that where in respect of any facts material ....
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.... as unexplained income and penalty proceedings u/s 271 (1)(c) were initiated. The Assessing Officer found assessee's explanation in regard to loans un-acceptable and levied penalty u/s271(1)(c).The appeal before the first appellate authority was dismissed. On second appeal to the Tribunal, same was allowed in favour of the assessee. When the matter traveled to the Hon'ble High Court, Hon'ble High Court reversed the decision of the Tribunal. The matter traveled to the Hon'ble Supreme Court. The Hon'ble Supreme Court referred to two decisions of Bombay High Court and made following observations: "In CIT v. P.M. Shah [1993] 203 ITR 792, the High Court at Bombay observed that the Explanation to section 271(1)(c) created a legal fiction. It was that the assessee would be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof in the circumstances set out in the Explanation. But for such a legal fiction, it could never have been said that there was any concealment or furnishing of inaccurate particulars of income simply because the returned income was less than 80 per cent. of the assessed income. The Explanation shifted....
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....ct income did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under section 271 put to notice that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and, consequently, be liable to the penalty provided by that section. No express invocation of the Explanation to section 271 in the notice under section 271 is, in our view, necessary before the provisions of the Explanation therein are applied. The High Court at Bombay was, therefore, in error in the view that it took and the Division Bench in the impugned judgment was right." 14 Thus from above it is clear that explanation being part of section gets invoked automatically once the show cause notice is issued. There was another argument that there can be so many reasons for surrender for which another decision of Hon'ble Apex Court in case of Sir Shadilal Sugar and General Mills Ltd. Vs. CIT (1987) 168 ITR 705 was relied. This contention was also rejected by the followi....
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....e to the conclusion that issue of levy of penalty is not an action of penal nature rather it involves the element of "Strict Civil Liability". In this regard we would like to produce para 24 of the order which is as under: "The Explanations appended to section 272(1) (c) of the Income-tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The judgment in Dilip N. Shroffs case [2007] 8 Scale 304 (SC) has not considered the effect and relevance of section 276 C of the Income-tax Act. The object behind the enactment of section 271(1) (c) read with the Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section 276 C of the Income-tax Act." 16 From the above discussion on legal issues, following points emerge: (a) Penalty u/s 271(1)(c) is not of penal nature but "Strict Civil Liability"; (b) After insertion of explanation, ....
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....is the nature of the explanation furnished by the assessee in the case before us. First document refer to page 2 of the paper book which is a copy of the affidavit of the assessee furnished before the Assessing Officer. Through this affidavit it was stated that the assessee along with S/Shri Pritam Singh, Rajwant Singh, Rajiv Kumar and S.S. Empire Pvt Ltd. were in mutual agreement with M/s West Point Property Pvt. Ltd. for purchase of land for M/s West Point Property Pvt. Ltd,. The payment for such purchase can be made by any of the party. Further Shri Pritam Singh transferred a sum of Rs. 1,19,90,000/- which was received from M/s West Point Property Pvt. Ltd,. to assessee's Axis Bank account No. 30201010009195 in some urgent circumstances. It is further stated that Shri Pritam Singh had received a sum of Rs. 1.20 crore from M/s West Point Property Pvt. Ltd,. It is further stated that the amount was withdrawn by the assessee from Axis Bank and returned to M/s West Point Property Pvt. Ltd,. Affidavit of Shri Pritam Singh to the same effect has also been filed which is placed at page 3 of the paper book. Three receipts for receipt of a sum of Rs. 40 lakh each from the assessee signed....
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....arration 19.04.2006 75,00,000 75,00,000 Trf. From Pritam 20.04.2006 5,00,000 70,00,000 Self 21.04.2006 4221 70,00,000 0.00 Self 22.04.2006 44,90,000 44,90,000 Trf. From Pritam 22.04.2006 4223 44,90,000 0.00 Self 03.08.2006 1,01,000 1,00,679 Cash deposit 03.08.2006 4226 1,00,000 679.00 Rajwant On verification of the entries made in the said bank account , it is found the A.O. that during the year under reference the assessee has deposited Rs. 1.20 crore in the said bank account on various dates. In this regard, the assessee could not offer any satisfactory explanation. However, the onus to prove the source of money found to have been received by the assessee is on him, which he could not explain satisfactory during the course of assessment proceedings. 3. The contentions of the assessee that he was not given an opportunity to produce Sh. Pritam Singh is not correct on this date, as it is evident from the record that he was ....
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....by Shri Rajiv Kumar and not by any other party including the assessee i.e. Shri Charanjit Singh. Further witnesses who have signed the documents are same those who signed three receipts. Interestingly though the above documents i.e. MOU, compromise deed and receipts was issued on different dates and entry made on diffedrent locations but the same were signed by the same Notary Public at Khanna (Punjab) on 28.8.2007. After this observation the ld. CIT(A) has decided the issue vide para 5 which is as under: "5. It is clear from the detailed order passed by CIT(C) u/s 264 that the assessee could not explain the credits appearing in his bank account despite having more than sufficient opportunity both at the time of assessment proceedings as well as at the time of appellate proceedings. The explanation given by the assessee that the said money had been received as advance from Pritam Singh who in turn had received it from West Point Properties Pvt. Ltd. could have been very easily proved as genuine if the said persons i.e. Pritam Singh or West Point Properties Pvt. Ltd., had been produced before the A.O. to confirm the claim of assessee. However it is seen that the assessee co....