TMI Blog2008 (5) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the assessee, either to file return as required under section, 139 or 142(1) or 148 or even to disclose fully and truly all material facts necessary for the assessment and therefore the time limit of 4 years would apply, but we do not any merit in his contention that as per the proviso to section 147, no action of making of reassessment could be taken under this section after expiry of four' years from the end of relevant assessment year. His submission that under the scheme of the Act an assessment made under section 147 of the Act is a separate code has no force in view of the decision of R. Dalmia's case[ 1999 (2) TMI 4 - SUPREME COURT] and Special Bench decision in Raj Kumar Chawla's case [ 2005 (1) TMI 334 - ITAT DELHI-F] . Section 147 provides for assessment of the escapement of income and the enumerations as provided in Explanation 2 are items of deemed escapement. These are not part of procedure for assessment. For making an assessment for escaped income, there are various stages. Initially an opinion is to be formed vis-a-vis Explanation 2, then a notice for reopening the assessment is to be issued under section 148, and a time limit is to be seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come by way of investments proves that the main business is that of loans and advances, has rightly been rejected by the CIT(A) by stating 'Even if no income has been earned, the amount of transactions in dealing in shares and the investment in shares is much higher as compared to transactions of loans and advances. Specifically in the assessment year under consideration, the investment and the extent of transactions in shares is far in excess of transaction in loans and advances.' Assessee's case, therefore, does not fall in any of the exceptions in the Explanation to section 73 of the Act. Loss in trading of the shares therefore has rightly been treated as speculative loss. We accordingly reject assessee's appeal on this issue. Levy of penalty u/s 271(1)(c) - furnishing inaccurate particulars of income and concealment of income - assessee debited the capital loss to the P L Account - In our opinion, a mere rejection of assessee's claim for loss that too on a different ground by the appellate authority and, therefore, cannot, in any case, be equated with concealment. The Addl. CIT v. Delhi Cloth General Mills Co. Ltd.[ 1984 (1) TMI 10 - DELHI HIGH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct') the Assessing Officer on the following issue of law: Whether the proviso to section 147 has the effect of curtailing the limitation period for passing the order under section 147 as prescribed under section 153(2). 2. The brief facts of the case are that, the assessee is engaged in the business of finance and investment. The original assessment order under section 143(3) of the Act for assessment year under consideration, was made on 10-2-1999, determining a total loss at Rs. 87,35,134 allowing unabsorbed business loss of Rs. 86,14,332 and unabsorbed depreciation of Rs. 1,20,802 to be carried forward. The assessment was reopened and the Assessing Officer on entertaining a belief that the assessee had sold securities held as investments during the relevant year and the loss suffered on account of the sale was debited to the P L A/c as business loss, as the assessee was holding securities as investments and had shown them as asset in the balance sheet and transfer of such assets attract the provisions of section 45 of the Act and, therefore, any loss on account of transfer of such asset are required to be treated as capital loss under the head 'Capital gain' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel of the assessee Shri S.N. Soparkar pointed out that in this case, the assessment year involved is 1996-97. The original assessment was completed under section 143(3) on 10-2-1999. A notice under section 147 was issued on 14-6-2000. It was within four years from the end of the assessment year. Assessment under section 143(3), read with section 147 was made on 26-2-2002. It was beyond four years from the end of the assessment year. Learned counsel of the assessee also pointed out that it is not the case where there was failure on the part of the assessee, either to file return as required under section, 139 or 142(1) or 148 or even to disclose fully and truly all material facts necessary for the assessment. He, therefore, contended that as per the proviso to section 147 no action (which included making of reassessment) could be taken under this section after expiry of four years from the end of relevant assessment year. He submitted that under the scheme of the Act, barring special assessments, an assessment is made either under section 143(3) or under section 144 or under section 147 of the Act. The last category of assessment is made when the income has escaped asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a general provision and section 147 is a specific provision, and therefore, specific provision should prevail over the general provision. That being so the assessment in this case, was to be completed on or before 31-3-2002 or from one year from the making the return, whichever is earlier. A heavy reliance, is placed on the decision of Bangalore Bench of the Tribunal in Amitronics (P) Ltd. [ITA Nos. 299-302 (Bang.) of 2003, dated 7-4-2006]. 9. He then referred to Supreme Court decisions in the case of Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147; 154 stating that re-writing of statute is not permitted; in the case of Vikrant Tyres Ltd. v. First ITO [2001] 247 ITR 821, 826 prohibiting reconstruction of language; in the case of Mohammad Ali Khan v. CWT [1997] 224 ITR 672 675 (SC) and Punjab and Haryana High Court decision in the case of Dalmia Biscuits Ltd. v. CIT [1992] 194 ITR 749, 751 regarding importance of each word in the statute; Supreme Court decision in the case of Orissa State Warehousing Corpn. v. CIT [1999] 237 ITR 589, 604-5 stating that natural meaning is to be given to the statute; decision of Supreme Court in CWT v. Smt. Hashmatunnisa Begum [1989] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or reassessment under section 147 as held by Andhra Pradesh High Court decision in the case of CIT v. Supreme Constructions Co. [1995] 213 ITR 137. 12. Reliance is also placed on the Special Bench decision of the Tribunal in the case of Rajkumar Chawla v. ITO [2005] 94 ITD 1 (Delhi)(SB) wherein it is observed that section 148 confers jurisdiction merely to issue notice, calling for a return, in cases where income has escaped assessment, for making assessment or reassessment as provided under section 147. This section however does not make the assessment or reassessment mandatory but leaves it to the discretion of the Assessing Officer. 13. Reference is also made to the Punjab and Haryana High Court, in the case of Mrs. Rama Sinha v. CIT [2002] 256 ITR 481, which held that one a notice under section 148 is issued, the assessment has to be completed under section 147 read with section 143(3). The High Court also observed that the position was the same even prior to the amendment of section 148 with effect from 1-4-1989 and as the return filed under section 139, the procedural provision for making an assessment under section 143(3) of the Act also comes into play. 14. The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessment by reason of failure on the part of the assessee to make return under section 139 or in response to a notice under section 142(1) or section 148 of the said Act, to disclose fully and truly all material facts for his assessment for that assessment year. Therefore, it is only when the case falls under the proviso that the question of non-disclosure of material facts would become relevant and that the Explanation 1 to section 147 of the Act has a bearing on disclosure aspect and it applies to the proviso to the extent it allows initiation of the proceedings under section 147 on account of non disclosure of material facts by the assessee. 18. He also referred to Circular No. 549, dated 31-10-1989 explaining this amendment of provisions of section 147 by the Finance Act, 1987 with effect from 1-4-1989 stating that the Amending Act, 1987, has rationalized the provisions of section 147 and other connected sections to simplify the procedure for bringing to tax the income which escaped assessment, especially in non-scrutiny cases. Thus, the Amending Act, 1987, has substituted a new section 147 which contains simplified provisions as follows: (i) Separate provisions contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is subject to the provisions of section 148 to section 153 of the Act. Section 153 deals with the time limit for completion of assessment and reassessment Section 153(2) reading as: No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of two years from the end of the financial year in which the notice under section 148 was served. 21. It is contended that, thus, if the order of Bangalore Bench of ITAT is considered to be good decision then the following absurd situation would arise- (a) Suppose notice is issued and served on the assessee on 31-3-2001 i.e., exactly on the expiry of four years period from the end of the relevant assessment year then the issue and service of the notice is valid as per this decision. In response to this notice the assessee is supposed to file return of income within the time period of about 30 days and then the Assessing Officer is supposed to pass an order under section 143(3) read with section 147 of the Act, after giving adequate opportunity of being heard to the assessee. In view of the decision of the Bangalore ITAT, Assessing Officer would have no alternative but to pass order in such cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of section 147 are subject to the provisions of sections 148 to 153. 22. In view of the above, it is submitted that the correct interpretation of the words 'no action shall be taken in this section after expiry of four years from the end of the relevant assessment year' means no proceedings of reopening would be initiated after the expiry of four years from the end of the relevant assessment year and not the completion of assessment itself as held by the ITAT, Bangalore. 23. We have heard the parties and considered the rival submissions. In this case, original return declaring loss of Rs. 88,53,947 was filed on 30-11-1996. Assessment order under section 143(3) computing total loss of Rs. 87,35,130 was passed on 10-2-1999. A notice under section 148 was issued to the assessee on 14-6-2000 and assessment order under section 143(3) read with section 147 was passed on 26-2-2000. The assessee has taken an additional ground after relying on the judgment of ITAT, Bangalore that the assessment in this case has become time barred because of the provisions of the proviso to section 147 of the Act. As may be seen, the notice under section 148 for assessment year 1996-97 was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 or this section has been made for the relevant assessment year, after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. 26. The controversy in this case is as to what is that action which is prohibited to be taken under this section by using the words 'no action under this section shall be taken after four years from the end of the assessment year'. What is that action that is contemplated under section 147 of the Act? This section, as we understand, grants an authority to the Assessing Officer to reopen an assessment, if income had escaped assessment, to assess, reassess or recomputed such income. Separate provisions are made as to the conditions and the time limit within which the notice to be issued for reopening and the assessment or reassessment or recomputation to be made. These are contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year. Therefore, it is only when the case falls under the proviso that the question of non-disclosure of material facts would become relevant in such cases, if the assessee has made full disclosure on record, then even if such income has escaped assessment, no action can be initiated by the Assessing Officer under this section. Where, however, the said period of four years has not expired, the conduct of the assessee regarding disclosure of material facts need not be the basis for initiating the proceedings and they can be commenced if the Assessing Officer has reason to believe that the income has escaped assessment notwithstanding that there was full disclosure of material facts on record. The assessee in such cases cannot defend the initiation of action on the ground that the facts were already placed on record and that the Assessing Officer must have or ought to have considered them. Explanation 1 to section 147 of the said Act has a bearing on disclosure aspect and it applies to the proviso to the extent if allows initiation of the proceedings under section 147 on account of non-disclosure of material facts by the assessee. 29. A heavy reliance is on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts necessary for 'his assessment, for that assessment year'. Section 147 is not merely an enabling section to initiate reassessment but even to complete the reassessment. Section 147 provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may subject to the provision of sections 148 to 153 'assess or reassessed such income'. Section 148(1) provides that before 'making assessment or reassessment under section 147', the Assessing Officer shall serve on the assessee a notice requiring him to furnish a return of income. Section 149 provides for time limit for issue of notice under section 148. Section 153(2) provides that 'no order of assessment, reassessment or re-computation shall be made under section 147' after the expiry of two years from the end of financial year in which the notice under section 148 was served. Thus, it is clear that even section 147 is the provision for assessment. As per definition of word 'assessment' in section 2(8) 'assessment includes reassessment'. Thus it is incorrect to say that section 147 is merely to assume jurisdiction for reassessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143. Section 147 also postulates actual assessment . It observed that Thus, the provision of section 148 regarding issue of notice, section 149 prescribing time limit for issuing of notice or section 153(2) for prescribing time limit for completion of reassessment applies to all the situations for reassessment under section 147 but held that However, under the proviso where an assessment is earlier made under section 143(3), 'no action' shall be taken under section 147 after the expiry of four years from the end of relevant assessment year. This means not merely issue of notice but also includes completion of reassessment under section 147. 31. We are unable to agree with that view because even though, as the Bench observed, the words 'no action' are wide enough to include in its sweep 'assuming jurisdiction by formation of belief' as well as to complete the reassessment, it has to have the reference of the first action and that is that for initiating the jurisdiction under section 147. In our opinion section 147 is only an enabling provision empowering the Assessing Officer to reopen the assessment of income that had escaped assessment and res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39'. The position was the same even prior to the amendment of section 148 with effect from 1-4-1989. The unamended provision also provided that on issue of a notice under section 148 'the provisions of this Act shall, so far as may be, apply accordingly as if a notice were a notice issued under sub-section (2) of section 139'. Thus, it is evident that the return filed in response to a notice under section 148 has to be treated as if it has been filed under section 139. That being so, the procedural provisions for making an assessment under section 143(3) of the Act also come into play. A perusal of section 143 shows that the procedure prescribed therein applies to a return which 'has been made under section 139...'. In view of the clear provisions of law as discussed above, the findings of the Tribunal on this issue are in accordance with law and warrant no interference. 36. While explaining the provisions of section 147 as amended by the Finance Act, 1987 with effect from 1-4-1989 the Circular No. 549, dated 31-10-1989 stated as under:- (iv) A proviso to thy new section provides that an assessment which has been completed under section 143(3) or 147, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 152 deals with rates of tax to be charged on escaped the assessment and certain other specific provisions and lastly, the assessment is to be made within time limit provided under section 153 for completion of assessment or assessment'. 40. The words 'No action is to be taken' as appear in Explanation to section 147 are stated to be not only related to initiation of proceedings, because that is provided under sections 148 and 149, but also for computation of assessment. However, such an eventuality is for completion of assessment which is also provided in section 153(2) of the Act. The contention that such a position for action was provided in the proviso to section 148 up to 2005 and thereafter, on amendment of provisions its incorporation, it is in the proviso to section 147, which is claimed to be not a section under which notice for reopening is issued and therefore, Legislature has misfired, has no force. It is because section 147 is an enabling section authorizing Assessing Officer to reopen the case. It provides that if there is no fault of the assessee no action (of reopening to assess or reassess) shall be taken after 4 years from the end of the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no merits in the case of the assessee on the additional ground raised and is accordingly rejected. We accordingly hold that the proviso to section 147 does not have the effect of curtailing the limitation period for passing the order under section 147 as prescribed under section 153(2). 44. On the other aspect of the challenging the initiation of proceedings of reopening as raised in original ground, the CIT(A), considering the submissions and various decisions relied upon by the assessee, observed as under:- (6) The contentions raised have been considered. The provisions regarding reopening of assessment have been amended with effect from 1-4-1989. Under the amended provisions, the pre-requisite conditions for reopening, namely, failure on the part of the assessee to disclose fully and truly all material facts and (ii) there was information in the possession of the Assessing Officer, have been done away with and under the amended provisions, the only condition which is now required to be met in reopening is that the Assessing Officer should have reason to believe that income has escaped assessment. The judicial decisions which have been referred to by the Ld. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases of VXL India Ltd v. ACIT [251 ITR 295] and Garden Silk Mills Ltd. v. DCIT [135 CTR 405]. (8) The principle laid down by the Hon'ble Gujarat High Court in the above referred case applies totally to the facts of the appellant's case. On examination of material available on record, the Assessing Officer was of the belief that income had escaped assessment as capital loss claimed by the appellant company had been allowed as deduction against the business income. The Assessing Officer was therefore justified in issuing notice under section 147. This ground is therefore rejected. 45. The learned counsel of the assessee submitted that the CIT(A) is not justified in upholding the validity of reopening which was invalid on facts and circumstances. The assessment framed on misconception that the loss had occurred on capital account was also invalid. It was a change of opinion On the same facts. The reason to believe that income escaped assessment was on a wrong premises and therefore invalid. The CIT-DR on the other hand submitted that a wrong claim was made by the assessee and that was sufficient for reopening of the case. 46. We have heard the parties and considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record, the Assessing Officer was of the belief that income had escaped assessment as capital loss claimed by the assessee company had been allowed as deduction against the business income. The Assessing Officer was therefore justified in issuing notice under section 147. This ground is therefore rejected. 47. The next ground is on merits of the disallowance. The Assessing Officer disallowed the loss by holding it on capital account by observing that the securities sold were held as investment during the year. He has also noted that the said investments were shown as asset in the balance sheet. As the transfer of such assets attracted provisions of section 45, he held that the loss arising on transfer of such assets was required to be treated as capital loss. He therefore disallowed the claim of loss of Rs. 1,06,66,818. The Assessing Officer did not accept the contention of the assessee that the shares/securities were not purchased for the purpose of making investment of surplus funds but with the object of trading regularly in purchase and sale of shares and therefore the resultant profit/loss was a business loss. 48. Before the CIT(A) the assessee reiterated that it was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was treated as business income and not capital gain under section 45 of the Income-tax Act, 1961; that the Explanation to section 73 is not applicable, it being a company whose principle business was granting of loans and advances and it being also in business of granting loans and advances, Explanation to section 73 was not applicable; that the assessee is carrying on the activities like dealing in shares as well as financier and both these business were so inter-connected to be considered as a single business; that therefore the income of both these businesses will be computed together as per the provision of sections 28 to 44 of the Act; that a statement, showing income from operation for 5 years revealed that except for financial year 1994-95 relevant to assessment year 1995-96 and financial year 1995-96 relevant to assessment year 1996-97, the company has not earned any income on dealing in investment; that in fact, the company has not carried out such activity; and that therefore, the Explanation to section 73 would not be applicable and loss incurred on dealing of shares was to be held as 'Business Loss'. Apart from the above, the assessee also challenged the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the accounts, a copy of which has been placed on record by the Ld. Counsel that the investment in loans and advances is only Rs. 202.48 lakhs as compared to the investment in shares which amounts to Rs. 409.04 lakhs. Apparently, the major investment of the appellant company is in shares and not in loans and advances. Moreover from the details of sundry creditors for expenses it appears that the outstandings are only on account of amounts payable on purchase of shares. This fact has not been disputed by the appellant company. The extent of transactions in granting of loans and advances and sale of shares far exceeds the extent of transactions in granting of loans and advances. Therefore, it is apparent that the principal business of the appellant company is not that of granting of loans and advances. The loss arising from the business of purchase and sale of shares is therefore deemed to be speculation loss. The contention of the Ld. counsel that in the other assessment years the appellant company has not earned any income by way of investments proves that the main business is that of loans and advances, is not acceptable. Even if no income has been earned, the amount of transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso held by the CIT(A) that it was a trading loss, though a speculation loss. The CIT-DR relied upon the order of the CIT(A) and submitted that it was a clear case of speculation loss particularly in view of the fact that the assessee had sold the shares even before they were purchased without delivery thereof. The decision of the Special Bench in Concord Commercial (P.) Ltd.'s case does not help the assessee as the advancing of loans was not its principal business. 54. We have heard the parties and considered the rival submissions. The assessee had not explained either before the CIT(A) and also before us as to the position of the date of purchase of the scrip being after the date of its sale. This is a clear indication of the fact the transaction was settled without delivery and was in the nature of speculation. The loss of Rs. 52,11,500 incurred thereon was therefore as speculative loss and was required to be disallowed, in any case. 55. The assessee being a company its loss as relates to purchase and sale of shares would be on speculation account because of the specific provision of Explanation to section 73 of the Act unless it falls in the exception provided in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been disputed by the assessee either before the CIT(A) or even before us. It would thus be not difficult to hold that the extent of transactions in granting of loans and advances and sale of shares far exceeded the transactions in granting of loans and advances. In these circumstances we hold that the principal business of the assessee company was not that of granting of loans and advances. The decision of the Special Bench in the Concord Commercials (P.) Ltd.'s case does not advance the case of the assessee any further. The loss arising from the purchase and sale of shares was therefore rightly held to be speculation loss. 58. The contention of the assessee that in the other assessment years the appellant company has not earned any income by way of investments proves that the main business is that of loans and advances, has rightly been rejected by the CIT(A) by stating 'Even if no income has been earned, the amount of transactions in dealing in shares and the investment in shares is much higher as compared to transactions of loans and advances. Specifically in the assessment year under consideration, the investment and the extent of transactions in shares is far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the objection to the action of CIT(A) in confirming disallowance on a different ground was also rejected as the disallowance of trade loss in the appellate order pertained to the same amount and nature of income/loss; that the Assessing Officer has considered the net loss on sale and purchase of shares as capital loss and has disallowed the same and in the appellate order, the very same loss has been treated as speculative loss; that the source of item of income/loss for consideration was the same, i.e., as a result of trading of shares, that, therefore it was not a new source of income which has been considered by the CIT(A); that only the nomenclature or the nature of the loss had been changed in view of the provisions of the Act; that the assessee claimed wrong deduction of Rs. 1,06,66,817 which has been upheld by the CIT(A) in quantum appeal; that the assessee has not been able to substantiate the said wrong claim by any documentary evidence and it has also failed to prove that explanation offered was bona fide; that by claiming wrong deduction, the assessee has concealed the particulars of correct income; that as per the Explanation 1 to section 271(1)(c), wherein respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars of its income. The CIT(A) did not accept the contention of the assessee and held that it was without any basis and foundation and, therefore, not bona fide. 61. The learned counsel of the assessee submitted that all the material necessary for assessment have been submitted by the assessee in the original assessment as well in the reassessment proceedings and therefore there is no question of concealment of any particulars of income of furnishing of any wrong particulars thereof. It was nothing but a rejection of assessee's claim not amounting to concealment. He invited our attention to decision of Gujarat High Court in the cases of (i) CIT v. Lakhdir Lal Ji [1972] 85 ITR 77; (ii) Sarabhai Chemicals (P.) Ltd. v. CIT [2002] 257 ITR 355; (iii) CIT v. Baroda Tin Works [1996] 221 ITR 661 and National Textiles v. CIT [2001] 249 ITR 125 and submitted that the penalty initiated on a particular ground cannot be levied or upheld on a different ground. The penalty in this case was initiated on the ground that the assessee claimed a capital loss. It was levied on a ground that it was a speculation loss. The CIT(A) accepted that the disallowance cannot be made on capital ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the main provisions of section 271(1)(c) of the Act. Mere rejection of assessee's claim would not be sufficient to hold the assessee to be guilty of concealment. If there is no evidence on record except the explanation of the assessee which explanation is either found to be false or is unacceptable, it does not follow that concealment has been established. [CIT v. Anwar Ali [1970] 76 ITR 696 (SC), CIT v. Khoday Eswarsa Sons [1972] 83 ITR 369 (SC), CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC)]. 64. It is by virtue of Explanation only, that the Assessing Officer has been given a right to raise a presumption to deem certain sum added to income or disallowed in computing the income of a person, to represent the income in respect of which particulars have been concealed, if the assessee did not furnish an explanation or when explanation furnished was found false; and also when such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. In other words in a later case, the Explanation e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the CIT(A) also, that it was a business loss. Therefore the assessee cannot, in our opinion, be accused of not to have substantiated the explanation. 67. The next following sentence of Part B of the Explanation states 'and fails to prove that such explanation is bona fide.' The assessee claimed the loss on sale of shares on trading account and as aforesaid it was found accepted by the CIT(A) and therefore it cannot be said that assessee failed to prove that explanation was bona fide. On the contrary he proved that explanation was correct. It is different matter that the CIT(A) found another ground to uphold the disallowance, not even contemplated by the Assessing Officer at the time assessment or reassessment in the course of which the penalty proceedings were initiated and the assessee was required to show cause and give explanation for making a claim of loss at that stage. 68. The third sentence of Part B of the Explanation is 'and that all the facts relating to the same and material to the computation of his total income have been disclosed by him'. The assessee had disclosed all material facts that are relevant for computing the income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to section 271(1)(c) would instead exonerates the assessee from levy of penalty as the assessee has offered an explanation which though he is not only able to substantiate but proved that his explanation was bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. 70. On the facts and circumstances of the case, it is, in our opinion, a mere rejection of assessee's claim for loss that too on a different ground by the appellate authority and, therefore, cannot, in any case, be equated with concealment. The Addl. CIT v. Delhi Cloth General Mills Co. Ltd. [1986] 157 ITR 822 (Delhi) in similar circumstances deleted the penalty observing that the mere fact that a claim for expenditure stands disallowed does not, by itself lead to the inference that the assessee had furnished inaccurate particulars in regard to that item. Similarly, Madhya Pradesh High Court in the case of J.K. Jajoo v. CIT [1990] 181 ITR 410 observed that: But from the mere fact that a claim for certain expenditure is rejected, it cannot be held that the claim for expenditure made by the assessee was false or inaccurate to his kn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961, the requirement that the Department should establish that there has been a conscious concealment of particulars of income or a deliberate failure to furnish accurate particulars, is no longer necessary. In case additions are made and the explanation submitted by the assessee is not satisfactory, the income added should be treated as deemed concealment'. In the present case the assessee has made a claim for which the necessary particulars have been furnished and as aforesaid, that is evident by the fact that the assessment was reopened not because of the failure of the assessee but because of allowance of a wrong claim allowed in the original assessment completed under section 143(3) of the Act. The assessee has given an explanation that the loss was on trading account and not on account of sale of investment and that explanation was found to be correct and upheld by the CIT(A) as well. Thus the assessee has been able to substantiate the said claim on the basis of which the penalty was initiated by the Assessing Officer and it has also proved that explanation offered was bona fide. The loss which has been claimed as a trading loss but disallowed by Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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