TMI Blog2004 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act amounting to Rs. 2,20,000 was legal and valid?" During the course of the assessment for the assessment year 1985-86, the Assessing Officer noticed that a sum of Rs. 2,96,575 was shown by the assessee as an amount due to sundry creditors, but that the said amount was not an amount payable by the assessee, but the said amount was one which was already received by the assessee and credited to its bank account, though the certificate for deduction of tax at source had not been received. The assessee had earlier filed a revised return continuing to show the sum of Rs. 2,96,575 as due to sundry creditors. After the aspect was highlighted by the Assessing Officer, the assessee filed yet another revised return accepting the receipt of the sum of Rs. 2,96,575 as having been received on July 27, 1984. The assessee did not account for the other receipt totalling Rs. 46,464 which also formed part of the gross receipt of the assessee. Ultimately, the Assessing Officer completed the assessment adding a sum of Rs. 2,96,575 and a sum of Rs. 46,464 as the income of the assessee. The said assessment became final, the assessee not having appealed against it. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books. The Commissioner of Income-tax (Appeals) accepted these contentions of the assessee and verified the profit and loss accounts for the assessment year 1986-87 and accepted the case that the total receipt had been accounted for in that year. Hence, it could not be said that the assessee had made any attempt at concealing its income or receipt. Similarly, the omission to include Rs. 46,464 was attributable to non-receipt of TDS certificate during the year. Hence, the imposition of penalty under section 271(1)(c) of the Act was not justified. Hence, he allowed the appeal and set aside the order imposing the penalty. The Department appealed to the Income-tax Appellate Tribunal. The Tribunal held that the assessee did not offer an explanation at the assessment stage and this is a case to which Explanation 1(A) to section 271(1) was attracted and the explanation offered at the stage of penalty proceedings was not bona fide and that project completion method was not being followed and that all materials enabling the computation of total income of the assessee were not disclosed at the assessment stage. Even if any justification could be found for disclosing the profit on projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt of this amount was not disclosed. As regards the sum of Rs. 2,96,575, learned counsel submitted that the Commissioner of Income-tax (Appeals) had made the correct approach to the question and has rightly accepted the contention of the assessee. It was not as if the assessee had not disclosed this amount. He had included it in the return, though no doubt, it was shown as the amount due to sundry creditors. But the assessee himself had revised the return accepting that the said sum was received during the relevant accounting year in its second revised return and in that situation, the imposition of penalty was not justified. There was no mens rea and there was no concealment of any material particulars by the assessee and it could not also be said that he had furnished inaccurate particulars in the return. Counsel relied on the decision in CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP) in support. In that decision, the Madhya Pradesh High Court held that once a revised assessment was regularized by the Revenue and once the Assessing Officer had failed to take any objection in the matter, the declaration of income made by the assessee in his revised returns and his explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o circumstances, they lead to the same effect, viz., keeping off a certain portion of income. The former is direct while the latter may be indirect in its execution. A conspectus of the Explanation added by the Finance Act, 1964, and the subsequent substituted Explanations makes it clear that the statute visualized the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation (both after 1964 and 1976) is a rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. Explanation 1 automatically comes into operation when, in respect of any facts material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the total income is deemed to represent the income in respect of which particulars have been concealed. As per the provision of Explanation 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 under the section. No express invocation of the Explanation to section 271 in the notice under section 271 is necessary before the provisions of the Explanation are applied." The decision of the Patna High Court in CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292 [FB] relied on by learned counsel for the assessee also does not come to the aid of the assessee in this case. Therein, the Full Bench of the Patna High Court considered the effect of the amendment brought about to section 271(1) of the Income-tax Act and the addition of the Explanation and noticed that the burden had shifted to the assessee from the Department to offer a reasonable explanation for his furnishing an alleged inaccurate particular or concealing a particular income and it was for the Assessing Officer to consider the acceptability or otherwise of that explanation. This position has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any manner and to show that the facts of the case justified the deferring of the profit. It is also, in our view, justified in finding that the explanation offered by the assessee was a mere afterthought. In this situation, it cannot be said that the imposition of penalty was not justified or was not supported by section 271(1)(c) of the Act. Learned counsel for the assessee attempted to question the quantum of penalty imposed. We find that no such objection was raised on behalf of the assessee either before the Commissioner of Income-tax or before the Income-tax Appellate Tribunal, though the question referred to us in an omnibus form, may also take in the question of quantum. This was a dispute that was not raised by the assessee at any time before. Learned counsel for the Department also submitted that the quantum of penalty was proper and it could not be said to be excessive or not permitted by law. In the circumstances of the case and in the absence of the plea being raised earlier, we are not in a position to find any merit in this contention regarding the quantum of penalty imposed. We thus answer the question referred to us for decision in the positive and in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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