TMI Blog2009 (10) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;). 2. Facts, in brief, as per relevant orders are that return declaring income of ₹ 2,50,080 filed on 30th Oct., 2001 by the assessee, a Government contractor was processed under s. 143(1) of the Act. Thereafter, the case was taken up for scrutiny after issue of notice under s. 143(2) of the Act on 28th Oct., 2002. During the course of assessment proceedings, the AO noticed that the GP rate in the year under (consideration) declined to 6.04 per cent as against 14.80 per cent in the preceding year. To a query by the AO, the assessee explained that in the preceding year, the assessee was working with ONGC, Ankleshwar and doing road maintenance work while in the year under consideration apart from ONGC he constructed houses for backward classes, resulting in fall in gross profits. On scrutinizing the comparative details of expenses, the AO noticed that the assessee debited an amount of ₹ 13,81,645 on account of cartage expenses. To a query by the AO, the assessee submitted the details of the said expenditure, which included payment of ₹ 4,68,305 to Shree Jalaram Transport of Ankleshwar. The assessee also submitted xerox copies of the bills issued by the said tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RC book showing a tempo registered in his name. Besides, 100 duplicate cash memos/bills issued to various persons including the assessee as also confirmation of receipt of payment and certificate from SBI that two cheques of ₹ 1,12,000 and ₹ 2,00,000 bearing Nos. 780265 and 781684 respectively were paid to Jalaram Transport Co. on 1st Jan., 2001 and 29th March, 2001. A copy of letter from M/s Jalaram Land Organizers was submitted stating that they had allowed Jalaram Transport Co. to use their shop for transport business and did not charge any rent or electricity charges. It was contended that the addition was upheld by the learned CIT(A) not because of falsity of material evidence but due to misconception of facts like payment by account payee cheques where no bank account was maintained by the transporter. The said transporter had maintained only one vehicle viz. tempo. It was further contended that explanation of the assessee was bona fide and, therefore, no penalty should be levied. However, the AO rejected these contentions of the assessee since even after remand of the matter to the AO, the assessees could not substantiate his claim nor replied as to why the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Departmental Representative supported the order of the learned CIT(A). 7. We have heard the parties and gone through the facts of the case. Undisputedly, the assessee did not furnish any satisfactory explanation for the fall in GP rate before the AO or the learned CIT(A). On further verification of expenditure of ₹ 13,81,645 on account of cartage charges, the AO noticed that the expenditure included an amount of ₹ 4,68,305 paid to Shree Jalaram Transport of Ankleshwar. To a query by the AO, the assessee produced xerox copies of seven unsigned bills of the said firm. On perusal of these bills, the AO found that there were no signatures on any of the seven bills issued by the said transporter nor the assessee could submit any confirmation or produce the proprietor of the firm before the AO, the said transport firm having closed. A notice under s. 133(6) of the Act sent though RPAD to M/s Shree Jalaram Transport was returned by the postal authorities with the remarks left . Therefore the AO disallowed the amount. On appeal, claim was made that payment to Shree Jalaram Transport was made by account payee cheques while the learned CIT(A) found that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that the assessee furnished inaccurate particulars of expenditure by falsely claiming the payments to the transporter. In terms of provisions of s. 271(1)(c) of the Act read with Expln. 1 thereto and the judicial pronouncements in the cases of B.A. Balasubramaniam Bros. Co. vs. CIT (1999) 157 CTR (SC) 556, CIT vs. B.A. Balasubramanian Bros. Co. (1984) 40 CTR (Mad) 217 : (1985) 152 ITR 529 (Mad), CIT vs. Mussadilal Ram Bharose, CIT vs. K.R. Sadayappan (1990) 86 CTR (SC) 120 : (1990) 185 ITR 49 (SC) : TC 50R. 795, Addl. CIT vs. Jeevan Lal Sah (1994) 117 CTR (SC) 130 : (1994) 205 ITR 244 (SC) : TC 50R.973 and KP. Madhusudhanan vs. CIT (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC), it is well-established that whenever there is difference between the returned and assessed income, there is inference of concealment. The Expln. 1 to s. 271(1)(c) of the Act raises a presumption that can be rebutted by the assessee with reference to facts of the case. Thus, the onus is on the assessee to rebut the inference of concealment. The absence of explanation itself would attract penalty. The explanation offered by the assessee should not be false. The onus laid down upon the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, it is a settled law that in economic offences, the statutory liability to pay either duty or tax is nothing but a strict liability where the question of proving beyond the shadow of doubt one's existence of bona fide belief that amount is not taxable does not arise. It goes without saying that any violation of the law or rules relating to economic offences, either relating to the payment of duty or tax, as the case may be, the theory of mens rea is not attracted. In such matters, the rules of interpretation contemplate a strict interpretation rather than a liberal and wider interpretation. The breach of civil obligation which attract a penalty under the provisions of an Act would immediately attracts the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman, SEBI vs. Shriram Mutual Fund (2006) 131 Comp Cases 591 (SC) : (2006) 5 SCC 361. This view has been reiterated by the Hon'ble Supreme Court in their decision dt. 29th Sept., 2008 in the case of Union of India Ors. vs. Dharamendra Textile Processors Ors. in Civil Appeal Nos. 10289-10303 of 2003. 7.3 Hon'ble Allahabad Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption is raised against the assessee that the assessee is guilty of fraud or gross or willful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent.' As to what could be the explanation by which the assessee can rebut the presumption raised against it, is stated by the apex Court in the same decision in the following words while confirming the view expressed by the Full Bench of the Patna High Court in the case of CIT vs. Nathulal Agarwala Sons (1985) 47 CTR (Pat)(FB) 258 : (1985) 153 ITR 292 (Pat)(FB) : 'The Patna High Court emphasised that as to the nature of the explanation to be rendered by the assessee, it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given, the burden placed upon him would be discharged and the presumption rebutted. We agree. We further agree that it is not the law that any and every explanation by the assessee must be accepted. It must be an acceptable explanation, acceptable to a fact finding body. We are aware that it would not be possible for the High Court to enter into a fact-fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her price charged by M/s Akbarali Nazarali to the assessee the explanation that this was because of insistence about the quality of goods and the option to reject the goods if the quality was found unsatisfactory was also accepted, in relation to the third point regarding bearer cheque of ₹ 30,000. The explanation tendered by the assessee that a partner of M/s Akbarali Nazarali had encashed the cheque and temporarily utilised the funds before bringing them into the books of the firm in the subsequent years has also been found to be a probable explanation by the Tribunal. After recording the aforesaid findings, the Tribunal held that the explanation given by the assessee in respect of the above points raised by the assessing authorities is such that the balance of probabilities is in favour of the assessee and insofar as the discrepancies in the books of the seller are concerned, that was a matter for the said firm to explain and for that the assessee could not be said to have committed any default so as to be visited with penalty. In these circumstances, Hon'ble High Court concluded that the Tribunal was justified in deleting the penalty imposed by invoking the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s, 271(1)(c) on the ground that the assessee failed to prove the genuineness of the payments made of ₹ 4,68,305 to M/s Shree Jalaram Transport and thus furnished inaccurate particulars of income. The AO in para 8 of his order dt. 23rd March, 2006 stated that said party M/s Shree Jalaram Transport to whom the assessee has paid ₹ 4,68,305 was not available since the letter written under s. 133(6) came back with the postal remark left . AO thus concluded that party named Shree Jalaram Transport did not exist at all and treated the cartage expenses paid to said party as not genuine. Secondly the party was not produced. The copies of bills produced did not bear signature. The transporter was not maintaining record etc. 3. It is pertinent to note that with regard to this addition, the assessee filed appeal before the CIT(A) and placed on record the further evidences, which are as under: (i) Affidavit of Shri Mahendra T. Rana, proprietor of Shree Jalaram Transport. (ii) Letter from the owner of the shop regarding the space given to Shree Jalaram Transport. (iii) Certificate from the sm. ONGC branch stating that the payments of ₹ 1,12,000 and ₹ 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was not able to explain to the satisfaction of the AO as reported by the AO in the remand report submitted to the CIT(A) and the learned CIT(A) confirmed the addition after taking into due consideration the remand report. The AO also observed in respect of the bills issued to the assessee by Shree Jalaram Transport that they were unsigned, the assessee on which has remained silent. Finally in the penalty order, the learned AO distinguished the facts of various case laws relied upon as noted in para 7 of the penalty order. On further appeal, the learned CIT(A) confirmed the penalty as per his finding vide para 5 of his order which reads as under: 5. I have considered the submissions. It is seen that the same set of documents were filed before the CIT(A) also during the course of appellate proceedings and after careful examination of the same, the CIT(A) held that the payment allegedly made was not genuine, and therefore, dismissed the appeal. Therefore, it has been clearly held by the CIT(A) that the appellant's claim of having made this payment was not correct and rightly disallowed by the AO. This clearly means that the appellant's case attracts Expln. 1 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings have considered various evidences half-heartedly. The learned counsel of the assessee also submitted that the unsigned bills were received from Shree Jalaram Transport is also no help to the Revenue in the penalty proceedings, because the proprietor of Shree Jalaram Transport, during the course of remand proceedings, admitted that he has issued the bills (though unsigned), received payment by cheques, he is assessed to income-tax which is evident from the return of income placed on record. He filed the return for the asst. yr. 2000-01 declaring total income of ₹ 54,980. In this return of income he has shown the income from Jalaram Transport under s. 44AE of the IT Act and TDS at ₹ 8,779. Finally the learned counsel of the assessee pleaded that the assessee was negligent of making the payment on unsigned bills through crossed cheques and for this reason the addition was upheld in the quantum assessment, but after making cross verification in remand proceeding penalty under s. 271(1)(c) is not leviable. 9. Shri B.D. Barot, learned Departmental Representative, on the other hand, supported the impugned orders of the authorities below. The learned Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticulars of income [CIT vs. Ajaib Singh Co.]. The standard of proof for imposition of penalty is different from that on which the quantum of an addition of an income can be sustained [CIT vs. Garg Engineering Co. (1998) 148 CTR (All) 341 : (1999) 235 ITR 451 (All), CIT vs. Chandrakant M. Tolia (1996) 135 CTR (Mad) 256 : (1996) 220 ITR 438 (Mad)]. Penalty on the ground of concealment can be imposed only if there is conscious al1d deliberate concealment on the part of the assessee. CIT vs. N.A. Mohamed Haneef 1974 CTR (SC) 129 : (1972) 83 ITR 215 (SC), Jumabhai Premchand (HUF) vs. CIT. In the present case on hand, the assessee has furnished all the details about the payment of cartage expenses to M/s Shree Jalaram Transport. The assessee produced the owner of Jalaram Transport before the AO who obtained the signature on order sheet. The owner of Jalaram Transport has produced RC book showing tempo for his business registered in his name, goods carriage permit issued in his name, nearly 100 duplicate cash memos/bills issued to various persons including that of the assessee, confirmed the receipt of payments. The assessee has also produced certificate from the SBI that two cheques of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, penalty under s. 271(1)(c) of the IT Act, 1961 is leviable? 2. The assessee is a Government contractor and filed his return for asst. yr. 2001-02 declaring income of ₹ 2,50,080. On scrutiny of account, the AO found that an amount of ₹ 13,81,645 was debited on account of expenses which included expenditure of ₹ 4,68,305 paid to Shree Jalaram Transport ( SJT' for short) of Ankleshwar towards transport charges. The AO held that payment of ₹ 4,68,305 was not genuine and therefore disallowed the same. This disallowance was confirmed on appeal by the learned CIT(A) and by learned Members of the Tribunal. The AO had also initiated penalty proceedings under s. 271(1)(c) of the Act. 3. In reply to the above show-cause notice, the assessee contended that the facts and circumstances of the case were not properly appreciated in assessment proceedings in letter dt. 8th Nov., 2004 filed before the AO. A portion of the submissions has been reproduced in the penalty order. The AO held that the contentions advanced even in penalty proceedings were untenable, as the assessee was unable to explain his case. In the remand quantum proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has furnished all the details about the payment of carriage expenses to SJT . The assessee produced owner of SJT before the AO and produced relevant documents and confirmed the receipt of payment. The certificate of SBI confirmed that ₹ 1,12,000 and ₹ 2,00,000 respectively were paid to SJT on 1st Jan., 2001 and 29th March, 2001 was on record. He concluded that the explanation of the assessee was not found to be false. In his view, the basic premise on which the AO imposed penalty was most important aspect that why the bills issued to the assessee by 'SJT' were unsigned, assessee remained silent , and the same lost its significance for the purpose of levy, once transporter appeared and admitted the issuance of bill and receipt of payment in remand proceedings. The learned JM therefore cancelled the penalty in his proposed order. 7. To resolve the aforesaid differences, the matter was fixed and both parties have been heard. The learned counsel for the assessee, Shri Rasesh Shah drew my attention to the followings evidences produced before the Revenue authorities in support of his claim, which have also been considered by the learned JM in his propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Although in the penalty orders, there is no reference to the order of the Tribunal in quantum appeal dt. 7th Nov., 2008, I find that on the controversy relating to the payment by cheque, the learned Members of Tribunal Bench did not accept the certificate of bank relating to the payment in question. It was observed that bank's statement was not clear and that in absence of specific statement of the bank that the cheques were account payee cheques or the payment of........ the amount claimed to be paid to Shree Jalaram Transport cannot be accepted. Accordingly, the order of the CIT(A) was confirmed and addition upheld. 10. In reply to the show-cause notice in penalty proceedings, the assessee claimed that the facts recorded by the Tribunal in its order were not correct. A part of the assessee's reply is reproduced in the penalty order and is as under: (3) ....The assessee produced the owner of said Jalaram Transport before you during the appellate proceedings where you had to submit RR to Hon'ble CIT(A). You have obtained his signature on order sheet. Moreover, he had produced before you RC book showing tempo for his business registered in his name. Goods carria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned herebefore. Nowhere the learned Hon'ble CIT(A) has mentioned in the appellate order that the explanation of the assessee is not bona fide nor the proofs/evidences produced are false/non-genuine. Therefore also, there is no question of furnishing inaccurate particulars of expenditure or concealment. Mens rea of quasi criminal offence is not established. Above contentions were held to be untenable and were rejected by the learned CIT(A) in quantum appeal. Therefore, the AO also rejected them. On the question of transporter appearing and accepting the payment, the AO observed that question of unsigned bills was not explained. Accordingly, penalty was levied after rejecting reply of the assessee. On further appeal, the learned CIT(A) has mainly relied upon the facts of dismissal of assessee's quantum appeal. No further fact has been stated to confirm the levy. 11. Before proceeding to comment on the reasons, which influenced the learned AM to confirm the action of Revenue authorities. I would like to make some observations on the statutory provisions and the case laws cited at Bar and noted by the Revenue authorities and learned Members in their proposed orders. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en any afresh explanation except what has been stated in quantum/assessment proceedings. This is against record as discussed above. The learned AM, I say with lot of respect, was also not correct in observing that the finding of the Tribunal in quantum appeal has become final, nor even disputed before him. The finding of Tribunal was vehemently challenged. The learned AM has further observed that certificate from bank relating to issue of cheques was rightly rejected. The explanation of the assessee was held to be not bona fide and that the matter was fully covered by Expln. 1 to s. 271 (1)(c) of the Act. The premise on above conclusion was arrived at is not correct. 12. Having considered the facts carefully, I am unable to ascribe to the view taken by the learned AM. The question involved in penalty proceedings was whether the claim of the assessee relating to the deduction of ₹ 4,68,301 towards transport charges in the account of SJT was false and therefore the assessee was covered by provision of s. 271(1)(c) of the Act. It is settled law that the findings recorded in the assessment proceedings is not conclusive, although it is entitled to great weight. The penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
