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2013 (11) TMI 226 - ITAT AHMEDABADPenalty u/s 271(1)(c) - CIT upheld penalty - Held 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 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 his explanation with the support of legitimate evidences - Question of levy of penalty restored back to the stage of the AO - Decided in favour of assessee.
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