TMI Blog2009 (1) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... res is bona fide . The assessee has substantiated his explanation. When the assessee has furnished all the material facts for the purpose of computation of total income the AO is duty bound to calculate correct total income in accordance with law, which may be different than the total income calculated by the assessee. Mere fact that AO while discharging his duty is recalculating the total income in accordance with law which is not the same as calculated by the assessee, it cannot be held that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income or there is a deemed concealment in accordance with Explanation 1 to section 271(1). This is not a fit case, where penalty under section 271(1)( c ) read with Explanation 1 can be invoked - the penalty of Rs. 9,21,803 levied by the Assessing Officer under section 271(1)( c ) of the Act is cancelled - the appeal of the assessee is allowed. - SUNIL KUMAR YADAV AND A.L. GEHLOT, JJ. Santosh Parab for the Appellant. Mahendra Goyal for the Respondent. ORDER A.L. Gehlot, Accountant Member. - This is an appeal by the assessee against the order of ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, is definitely user of the funds for the purpose of business. Accordingly, all tests as laid down in section 36(1)( iii ) have been squarely met, namely : ( i )The company has borrowed capital; ( ii )The borrowed capital has been used for the purpose of business; ( iii )The company has incurred interest expenditure on such borrowed capital so utilized. It is now a well established principal that even for a financial and investment company or a company carrying on the business of trading in shares the dividend income earned by such a company is assessable only as dividend income merely due to the operation of provisions of section 56 though the character of the income is business and this position cannot stand in the way of the assessee claiming business expenditure under the head business. In such cases even though the income from shares has been assessed under the head other sources the courts have consistently allowed the claim of such assessees for deduction of interest expenditure under the provisions of section 361)( iii ). In this context, the assessee relied upon the decision of Calcutta High Court in the case of CIT v. Kanoria Investments (P.) Ltd. [1998] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 income are used. It will be noted that as regards concealment, the expression in clause ( c ) is has concealed the particulars of his income and not has concealed his income . The expressions "has concealed the particulars of income" and "has furnished inaccurate particulars of income" have not been defined either in section 271(1)( c ) or elsewhere in the Act. One thing is certain that these two circumstances are not identical in detail although they may lead to the same effect, namely, keeping off a certain portion of income. The former is direct and the latter may be indirect in its execution. 5.1 The word "conceal" is derived from the latin concelare which implies contcelare to hide. Webster in his New International Dictionary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded 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 section 2(33) means, prescribed by the rules under the Act . The forms are, accordingly, prescribed by the rules framed under the Act. Section 140 lays down as to by whom such return can be signed and verified. 5.3 Rule 12 of the rules framed under the Act prescribe the forms in which the return of income is required to be furnished. The return is required to be verified in the manner indicated in the form. By such verification the assessee declared to the best of his knowledge and belief that the information given in the return and the annexure and statements accompanying it was correct and complete and that the amount of total income and other particulars shown therein were truly stated and related to the previous year relevant to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the statements accompanying it was correct and complete and that the amount of total income and other particulars shown were truly stated and related to the previous year relevant to the assessment year. A statement was also required to be made that no other income accrued or arose to or was received by the assessee. It will, thus, be seen that the form of return of income included a variety of particulars to be disclosed and the particulars of income to be disclosed can be seen against the items which related to disclosure of income besides particulars other than those which related to the income of the assessee, such as his name, address, status, etc. The forms of returns are obviously prepared in the context of the duty of a person to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 section 143(1) at the relevant time, he had to assess the total income without requiring the presence of the assessee or production by him of any evidence that the return is correct and complete, as laid down in section 143(1). Where, however, the ITO was not satisfied without the presence of the assessee or production of evidence that the return is correct and complete , he was required to issue notice enabling the assessee to produce evidence on which he may rely in support of the return. The total income is, in such cases of regular assess- ment assessed after hearing the evidence adduced and considering all material gathered by the ITO as provided in section 143(3). It, therefore, follows that in the assessment proceedings under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 accordance with law on the basis of raw material furnished by the assessee. Under these circumstance if test of sweet dish is some different than the dish prepared by the assessee, it cannot said the assessee has concealed the particulars of his dish/income or has furnished inaccurate particulars of such dish/income. If the assessee prepared Namkin, Salt dish where sweet dish was required and furnished salt to Assessing Officer instead of sugar, in these circumstances that case is certainly a case of concealed the particulars of his dish/income or has furnished inaccurate particulars of such dish/income. 5.6 There cannot be a straitjacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide 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." 5.8 A conspectus of the Explanation makes it clear that the statute visualised the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation is a rule of evidence. Presumptions which are rebutting table in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts are within the special knowledge of the assessee. Section 106 of the Indian Evidence Act, 1872, gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessing Officer as to whether he can invoke the Explanation or not. Explanation 1 comes into operation when, in respect of any facts material to the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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, 5.11 On consideration of facts of the case under appeal we do not find that the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income. The assessee furnished a note along with the return of income reads as under: "1. Interest expenditure is not considered as disallowed under section 14A as the investments have been made not for the purpose of earning dividends but for business consideration including capital appreciation. However, without prejudice to the above contentions, if any interest were to be considered as being in relation to dividends earned, the disallowance would amount to Rs. 41,18,869 the working of which is being given in annexure enclosed." 5.12 We find that the assessee has disclosed all the relevant material facts for the purpose of computation of total income. We also find that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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