TMI Blog2009 (3) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... . As said above that the CIT (A) has decided the case on facts and we also decide this case considering the totality of the case with reference to above discussions, we find that it is simple case of fighting in between duty and rights which automatic do not amount to a case of concealing particulars or furnishing inaccurate particulars of income, neither there is finding of the Assessing Officer that explanation furnished by the assessee is found to be false. In our considered view it is not a fit case for levy of penalty u/s 271(1)( c ). Therefore, we uphold the order of CIT(A) on this count. - A.L. GEHLOT AND SMT. ASHA VIJAYARAGHAVAN, JJ. Sanjay Kumar for the Appellant. K. Shivaram for the Respondent. ORDER A.L. Gehlot, Accountant Member. - This appeal filed by the revenue is directed against the order of learned CIT(A)-XVII, Mumbai, passed on 8-9-2005, for the assessment year 1997-98 wherein the revenue has raised the following grounds of appeal: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty levied under section 271(1)( c ) of Rs. 10,36,000. 2. The appellant prays that the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ightly levied penalty under section 271(1)( c ). In support of his contentions, the learned DR has relied on the decision of the Hon ble Apex Court in the case of Union of India v. Dharamendra Textiles Processors [2007] 295 ITR 244 1 . 5. On the other hand, the learned AR has submitted that there is no concealment of any income. In fact the claim of the assessee was a bona fide claim. The assessee disclosed the accounting treatment in its P L a/c and balance sheet. He further submitted that merely just change of head of income, there cannot be a case of concealment as all the facts were fully disclosed by the assessee. The shares were treated as stock-in-trade and thereby deriving income from trading in shares whereas on the other hand the same shares have been treated as investment for the purpose of calculation of long-term capital gain but the addition was finally made on the ground that the share trading loss was speculation loss and hence cannot be adjusted. The learned AR further submitted that purchase and sale of shares were delivery basis; hence, the transaction cannot be treated as speculative. For this contention, he relied on the decision of the Delhi ITAT Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused the record as well as citations quoted by both the sides. The crux of the matter to be examined is whether penalty under section 271(1)( c ) read with the Explanation 1 of section 271(1) is applicable to the facts of the case under consideration. Detailed discussions in respect of concealment of particulars, furnishing of particulars and penalty under section 271(1)( c ) has been made by the ITAT Mumbai Bench "B-1" in the case of Mimosa Investment Co. (P.) Ltd. ( supra ), which is as under: 6.1 The proceedings under section 271(1)( c ) can be initiated only if the Assessing Officer or the first Appellate authority is satisfied in the course of any proceedings under the Act. If he is satisfied as per clause ( c ) that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty the sum mentioned in sub-clause ( iii ) of clause ( c ). The expression used in clause ( c ) is has concealed the particulars of his income or furnished inaccurate particulars of such income . Therefore, both in cases of concealment and inaccuracy the phrase particulars of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count or otherwise which resulted in keeping off or hiding a portion of its income is punishable as furnishing inaccurate particulars of its income. Let us examine what are the duties of assessee under the Act and Rules to disclose thereunder particulars of income. Under section 139(1) of the Act where in, it was, inter alia , provided that every person, if his total income in respect of which he is assessable under the Act during the previous year, exceeded the maximum amount which was not chargeable to income-tax, shall furnish a return of his income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. It was, therefore, obligatory on a person whose total income exceeded the maximum amount which was not chargeable to income-tax, to furnish a return of his income during the previous year , in the prescribed form. Such return is required to be verified in the prescribed manner. Not only is he obliged to furnish return of his income, meaning thereby to disclose fully and truly all his income, but he is also required to set forth other particulars as may be prescribed. The word prescribed as defined by secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for debate or deduction of income-tax, was to be furnished with the required particulars. In Part IV, sums which are not included in Part I and claimed to be not taxable were to be stated. The statement of tax deducted at source and advance tax paid was to be furnished at Part V, giving particulars of the advance tax paid against salaries, interest on securities, other interest, dividends and any other income. Statement of particulars required under section 139(6) was to be furnished as per Part VI. The particulars of profits and gains of business which were to be furnished as per Annexure III to the return show that as many as 37 particulars were to be filled in for working out net profit or loss carried to Part I of the return. As per the notes below Annexure III, the assessee was required to attach profit and loss account and balance sheet and other particulars mentioned in the note, statement of particulars regarding depreciation and development rebate was also to be submitted as per section 2 of Annexure III. At the end of the form the prescribed verification was required to be made, inter alia , to the effect that the information given in the return and the Annexure and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from other sources is to be computed after making the deductions mentioned in section 57. Thus, under each head of income, there are provisions for deductions which are to be made while computing the income chargeable under that head. It, therefore, follows that it is an obligatory duty cast upon a person filing the return of income to disclose all his income derived from any source under various heads and indicate the income under each head, which is chargeable to income-tax, after making the permissible deductions. Disclosure of income would be disclosure of particulars of income, which a person is duty bound to disclose in fulfilment of his statutory obligations to pay tax on the income chargeable to tax. After the return is filed under section 139(1), the assessment of tax is to be made and for the purpose of making an assessment under the Act, the ITO makes an enquiry contemplated by section 142, in which notice is issued on the person who has made the return, to produce accounts, documents or furnish verified information in writing including statement of all assets, etc. However, where the ITO is satisfied that the return is correct and complete, as were the wordings of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the ITO, whose satisfaction alone mattered at the stage of the initiation of the penalty proceedings. Whether the burden of proof in a given case has been discharged on a set of facts is a question of fact. There was concealment or not is, ordinarily, a question of fact. Once bearing in mind the correct principles comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact. Similarly, whether the explanation offered by the assessee was bona fide or not is a question of fact. This aspect of the matter can be explained by a simple practical example. Determination of total income says preparation of one type of sweet dish, which is to be finally cooked by the ITO who is technical and expert in this regards. However the assessee may cook such dish of total income/dish on the basis of material available with him like books of account and other material say sugar, Ghee, etc. and furnish in return of income. If the ITO found that the dish/income prepared by the assessee is in accordance with test of law he may accept as it is. If the ITO found that the dish prepared by the assessee is not in accordance with law he can prepare such dish in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed concealment is provided in explanations. Often a question arose whether in cases where additions or disallowances made by the ITO the penal provisions of section 271(1)( c ) would attract. Explanation 1 takes care of this situation. The Explanation to section 271(1) of the Act reads as under: Explanation 1. Where in respect of any facts material to the computation of the total income of any person under this Act, (A)such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B)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, 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. 6.9 A conspectus of the Explanation makes it clear that the statute visual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that Part A of the explanation may be attracted. Mere non-acceptance of explanation offered by the assessee cannot form a basis for the satisfaction of ITO to the effect that the assessee has concealed particular of his income. The ITO must have some definite evidence to refuse the assessee s claim or evidence or explanation. 6.11 The essence of Part B of the Explanation is that the person must provide an explanation which is bona fide and he should substantiate that explanation by some evidence with him. If he fails to do so, his explanation may be treated as untenable. But when the assessee is able to offer reasonable explanation based on some evidence, the ITO cannot invoke Part B of the Explanation unless he has given finding based on some contradictory evidence to disapprove that explanation offered by the assessee which the assessee 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. 6.12 From the above discussion of scheme of the Act, two important things come out are that it is the duty of the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be made. Whatever the legitimate tax it must be assessed and must be collected. The purpose of this circular is merely to emphasize that we should not take advantage of an assessee s ignorance to collect more tax out of him than is legitimately due from him." 6.13 After furnishing particulars regarding calculation of income, as stated above that the assessee has right to claim exemption and deduction, according to him which are as per law. The Assessing Officer while discharging his duty allow or disallow assessee s claim and arrived at a different figure of total income then the total income declared by the assessee, that case cannot be said to be a case of furnishing inaccurate particulars or concealing of particulars of income. 6.14 In the light of the above discussion, if we consider the facts of the case under consideration, we find that the assessee has claimed loss from trading of shares and furnished all the relevant materials. The Assessing Officer treated the said loss under Explanation to section 73 and treated the said loss as deemed speculation loss and levied penalty under section 271(1)( c ). The CIT(A) cancelled the said penalty by holding that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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