TMI Blog2013 (11) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... alty. Meaning thereby an assessee has to prove to the satisfaction of the AO his bona fide. A situation where an assessee had offered an explanation duly substantiated by certain evidences to establish his bona fide. Therefore, in this manner, the onus, at first, has been discharged by the assessee as casted upon him by Explanation-1(B) of IT Act. The next step is that the AO has to investigate all those evidences and the onus thereafter shifts upon the AO to disprove the claim of bona fide of the assessee. The proceedings do not stop at that juncture. The AO is expected to communicate his reasoning for rejection of the said explanation of the assessee. Again if the assessee is not satisfied with the rejection of the AO, then the onus shifts upon the assessee to place on record substantial evidence in support of his truthness. Meaning thereby the onus of proving and disproving keeps on shifting as the proceedings are advanced. We are therefore, in this case, referring the issue of levy of penalty back to the stage of the AO to verify whether the assessee's explanation was altogether false being not substantiated by authentic evidences. The assessee is required to corroborate hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has furnished quantitative detail in respect of purchase, sale and process of tobacco upto the date of survey, i.e. 27.2.1997. It was explained that the said quantitative detail was prepared after verifying the books of accounts, bill books and delivery memos. The difference as per the said detail was claimed to be only 1629 Kgs. of Biddi- patti. Further, it was explained that the huge difference of stock of 29004 Kgs. was only due to the fact that certain purchases and sales were not in the knowledge of the Accountant, hence he had not informed at the time of survey proceedings. It has also been pointed out that the alleged stock difference was based upon delivery memos instead of sales bills. The assessee had taken an another recourse to explain the discrepancy that a transaction was conducted with Majalees Bidi Factory. The assessee was asked to produce the transportation details to authenticate the claim, but the assessee had not produced any transportation detail to establish that indeed the goods were despatched to Majalees Bidi Factory. The AO has noted that even during the course of survey proceedings, the Accountant was asked to state details of any stock lying in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess stock. Besides, rejection of books of accounts also cannot be found fault with an addition made in this behalf is also upheld." 4.1. During the penalty proceedings, it was firstly objected that the penalty proceedings initiated were barred by limitation because the Tribunal has passed the order on 29.2.2008 and the period of passing a penalty order had already expired on 31.12.2008. That objection of the assessee was overruled by the AO for the reason that the order of the Tribunal was received at the Office of the Commissioner Baroda in the month of August-2008, hence the time limit would expire on 28.2.2009. It is worth to mention that the assessee has received the order of the Tribunal in the month of June- 2008. Undisputedly, the impugned order u/s.271(1)(c) was passed on 23.02.2009, i.e. before the expiry of the time limit prescribed in the Act. Therefore, this objection is hereby rejected. 4.2. Regarding the main issue of quantum addition, the AO has held that the assessee had attempted to manipulate the accounts and the income was deliberately concealed. A minimum penalty @ 100% of the tax sought to be evaded of Rs.4,29,260/- was imposed. Being aggrieved, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of Accountant. He has therefore pleaded that in the light of several decisions as cited before ld.CIT(A), merely on the basis of a statement no addition should have been made and if at all the impugned addition had been made, atleast during penalty proceeding this argument should be judiciously considered. His next plank of argument was that the Accountant was not aware about the correct position of stock, hence the statement of the Accountant should not have been taken into account by the Revenue Authorities. His third plank of argument was that the assessee has furnished a reconciliation according to which the difference was only 1629 Kgs. of biddi-patti and that reconciliation was not rejected by the AO, hence while levying the penalty, the AO should have considered that reconciliation, so as to find out whether it was totally untrue or not. He has also pointed out some discrepancy that the survey party had taken the sales of 276418 Kgs. on the basis of delivery memos. This quantity of sales was already inclusive of an earlier sales which was recorded in the past in A.Y. 1996-97 and that fact was very much explained to the AO vide a reply dated 16.1.2009 but that reply w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, whether the default is established or not. (ii) However explanation 1(A) curtails the dispute / litigation in two ways, by making a statutory requirement of explanation from the assessee in respect of facts material to computation of his total income. Firstly if the assessee fails to offer an explanation the matter ends so far as levy of penalty is concerned as assessee's failure makes him liable for penalty u/s.271(1)(c). Secondly, if the explanation, though offered, is found to be false, then also the AO reaches to an inference to imposed penalty. However, if the AO is not able to find that explanation is false, then explanation 1(B) comes into operation. The explanation 1(A) is helpful to A.O. only for the purpose of coming to a conclusion that assessee is liable for penalty. If the assessee offers an explanation but that explanation is found by the authority, imposing penalty, to be false, assessee becomes liable for penalty. However, if it can not be said with certainty that explanation given by assessee is false then question whether assessee is liable for penalty or not remains unanswered. In fact provisions of Explanation 1(A) are only in support of levy of penalty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department and an order of the Respected Co-ordinate Bench delivered while deciding the quantum addition. At first, it is worth to mention that the penalty proceedings are not an automatic way of imposition of penalty. It is not correct to argue that the AO is not required to prove anything against the assessee. This argument of ld.DR cannot be universally accepted because the Revenue Department is required to detect as also establish the wrong doing of a tax-payer. Therefore, during the assessment proceedings on detection of some wrong committed by a taxpayer, an addition is required to be made; which ultimately result into levy of penalty. Therefore, upto this stage, the AO has to prove the wrong doings of a taxpayer through investigation. Further, ld.DR has also argued that filing of incorrect income results into evasion of tax. This argument can also not be accepted universally. During assessment proceeding, it may be possible that the assessee has not properly explained his stand and thus resulted into an addition, but as far as the penalty proceedings are concerned, several courts have held that these are independent to the assessment proceedings. In this regard, few case-la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livery memos and certain certificates of Majalees Bidi Factory along with the statement of account. We are of the considered opinion that while imposing the penalty the AO is required to examine the aforesaid explanation of the assessee to ascertain whether it was totally a false or an untrue explanation as prescribed under Explanation-1(A) to section 271(1)(c). Even the ld.DR Mr.Singh has not ruled out the importance of the said Explanation, but he has argued that the AO is not required to prove the falsity of the explanation offered. In our humble understanding, this explanation prescribes that where in respect of any facts material if a person offers an explanation which is found by the AO to be false, then the amount so added results into a levy of penalty. Therefore, the AO is to find out the truthness of an explanation. Side by side, the statute has also added Explanation-1(B) to section 271(1)(c). This part of the Explanation prescribes that where in respect of any facts material a person offers an explanation which he is not able to substantiate or fails to prove that such explanation is bona fide, then the said failure results into levy of penalty. Meaning thereby an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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