TMI Blog2010 (11) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment under s. 144 of the Act has been upheld by the learned CIT(A) - Since the additions have been sustained on estimate or preponderance of probabilities, in our opinion, it is not a fit case to attract the levy of penalty under s. 271(1)(c) of the Act. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars of income by the assessee - Decided in favour of the assessee - ITA No. 3250/Ahd/2007; - - - Dated:- 30-11-2010 - Mukul Shrawat, A.N. Pahuja, JJ. K.P. Shah for the Assessee Vimalendu for the Revenue ORDER A.M. Pahuja, Accountant Member:- 1. This appeal by the assessee against an order dt. 3rd May, 2007 of the learned CIT(A)-VI, Baroda, raises the following grounds:- "(1) The learned CIT(A)-VI, Baroda grossly erred in law and on facts in confirming penalty of Rs. 2,49,150 levied by AO under s. 271(1)(c). (2)(i) The learned CIT(A)-VI, Baroda erred in rejecting judicially settled law that the recording of AO's satisfaction is a condition precedent for initiation of penalty proceedings under s. 271(1)(c) and fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the assessment proceedings and despite sufficient opportunity given did not explain the sources of investments in FDRs, jewellery nor explained the cash found or transactions in the seized documents. As a result, assessment was finalized under s. 144 of the Act, determining total income of Rs. 30,91,780. Inter alia, an amount of Rs. 11,400 on account of unexplained cash, Rs. 1,58,160 + Rs. 2,23,128 on account of unexplained jewellery, Rs. 10,00,000 on account of unexplained expenditure in construction, Rs. 6,63,000 on account of amount invested in purchase of property Rs. 8,41,390 on account of receipts on sale of shops and Rs. 1,30,000 on account of land transaction was added. Simultaneously, penalty proceedings under s. 271(1)(c) were also initiated. 2.1 On appeal, the learned CIT(A) while upholding the completion of assessment under s. 144 of the Act, retained the addition of Rs. 37,200 on account of silverwares and deleted the remaining additions. The addition of Rs. 1,30,000 was not disputed in appeal. On further appeal, the Tribunal vide their order dt. 27th Feb., 2004 in ITA Nos. 4872/Ahd/1995 and 5148/Ahd/1996, restored back the matter back to the file of the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept Rs. 37,200 on account of silverwares. In other words the addition on account of gold jewellery of Rs. 1,75,294 which was confirmed by Tribunal was accepted as explained by CIT(A). It is added that there were two distinct opinions in regard to the item of addition, therefore the penalty is not leviable. In regard to the addition of Rs. 3,50,000 sustained by the Tribunal, it is stated that the addition was sustained by Hon'ble Tribunal on the ground of preponderance of probabilities and it was admitted by the Tribunal that the appellant is only the power of attorney holder of Shri F.K. Vohra and that the construction activities were carried out on behalf of Shri F.K. Vohra. 5.2 The main arguments of the appellant are that when there are two opinions on same set of facts no penalty can be levied under s. 271(1)(c). Secondly if the assessee gives an explanation which is unproved but not disproved then the Explanation to s. 271(1)(c) cannot help the Department as was held in the case of National Textiles vs. CIT (2000) 164 CTR (Guj) 209 : (2001) 249 ITR 125 (Guj). The appellant further relied upon judgment in the case of K.C. Builders and Ann us. Asstt. CIT (2004) 186 CTR (SC) 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended by the learned Departmental Representative, guidelines to be followed by the search parties in respect of seizure when they come across items of jewellery in the course of search proceedings and nothing more. Secondly, there could possibly be no standardized prescription, across all assessees, irrespective of their different situations and stations in life (financial or otherwise), as to the quantum of jewellery that may be considered as explained (which is apparently unaccounted), and which is how the said press release stands construed by the learned CIT(A). The same, though persuasive, cannot have a statutory value, the computation of taxable income, in all cases, to be guided solely by the statute alone, and as interpreted by the Courts, in consideration of course of the facts of each case. 5.4 The assessee, to his credit, we find, has identified one of his customers (Shri Ambalal Patel of Sadhakpur), as also Maharajkumar Shri Dhrindrasinhji (through his P.A.) to whom some gold ornaments and silverwares, respectively, were attributed, and explained as given for repair work and for sale in the statement under s. 132(4). Further, we find that this statement stands en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed by CBDT and the jewellery found during the course of search was thus reasonably explained to be owned by assessee. Accordingly the same was held as explained by CIT(A). The said press release from CBDT only speaks of guidelines to be followed by search party in respect of seizure of jewellery and it does not talk of jewellery being unexplained or unaccounted. The Hon'ble Tribunal has rightly held at para 5.3 that the said press release, though persuasive, cannot have a statutory value and that the provisions alone should be the guiding factors depending on the facts of the case. In view of above it is clear that the deletion of addition by CIT(A) was not based on the facts. Therefore it cannot be said that there were two opinions one by CIT(A) and the other by Tribunal based on the same set of facts. 5.3.4 Following jewellery was found at the assessee's residence and in bank locker:- Sl. No. Found at Particulars Value Seized 1. Steel safe (at assessee's residence) Gold jewellery-196.65 gms. 76,956 2. Steel cupboard (at assessee's residence) Gold jewellery 63.9 gms. sil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said amount of Rs. 3.5 lacs is also exigible to penalty in terms of Expln. 1 to s. 271(1)(c). 5.3.9 In terms of the provisions of s. 271(1)(c) and its Explanation the law on the subject can be spelt out in the following propositions:- (1) Wherever there is a difference between the returned and assessed income, there is an inference of concealment as a rule of law. (2) The responsibility for rebutting such inference is squarely on the taxpayer. (3) The assessee is expected to offer an explanation for the difference. Absence of any explanation, by itself, will merit penalty. (4) The explanation where offered, should not be found to be false or invalid. 5.3.10 In the instant case the Hon'ble Tribunal found the explanation of the appellant not valid in regard to source of jewellery items and found it to be false in regard to expenditure on construction activities. 5.3.11 The case law relied upon by the appellant i.e., National Textiles vs. CJT (2000) 164 CTR (Guj) 209 : (2001) 249 ITR 125 (Guj), K.C. Builders and Ann vs. Asstt. CJT (2004) 186 CTR (SC) 721 : (2004) 265 ITR 562 (SC) and Hindustan Steel Ltd. vs. State of Orissa (1972) 83 JTR 26 (SC) are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shing of inaccurate particulars of income whereas penalty was initiated for concealment of income only and thus its levy is bad in law. 7.2 I have considered the submissions of the appellant. It is seen from the assessment order that the penalty proceedings were initiated in respect of the additions made by the AO. Further the penalty is levied in respect of part of such additions and the basis of issuance of notice has remained the same while imposing the penalty. There is no doubt that concealment of particulars of income and furnishing of inaccurate particulars of income would at times overlap and as long as the basis for initiation of penalty is not shifted the imposition of penalty cannot be held bad in law. In the instant case in my view there is no shift in such basis at the time of levy of penalty. Accordingly the plea of the appellant is rejected and the ground is dismissed." 4. The assessee is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned Authorised Representative on behalf of the assessee while reiterating their submissions before the learned CIT(A), relied upon the decisions in the cases of CIT us. Calcutta Credit Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before the learned CIT(A) in respect of the amount of Rs. 10 lacs, ultimately, addition of only Rs. 3.50 lacs was sustained on the preponderance of probabilities. The expressions 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in s. 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. According to Law Lexicon, the word "conceal" means:- "To hide or keep secret. The word 'conceal' is con+celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the IT authorities." In Webster's Dictionary, "inaccurate" has been defined as:- "Not accurate, not exact or correct; not according to truth; erroneous as an inaccurate statement, copy or transcript." 5.1 If the disclosure of facts is incorrect or false to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid extent on estimate and preponderance of probabilities. Thus, two different views were taken on the additions made by the AO. Since the additions have been sustained on estimate or preponderance of probabilities, in our opinion, it is not a fit case to attract the levy of penalty under s. 271(1)(c) of the Act. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars of income by the assessee. The mere rejection of the explanation of the assessee did not render the explanation false. When two views are possible, no penalty can be imposed, is a principle that has been enunciated in the decision in the case of CIT vs. P.K. Narayanan (1999) 152 CTR (Ker) 115 : (1999) 238 ITR 905 (Ker). Similar view was taken by the Hon'ble Calcutta High Court in the case of Calcutta Credit Corporation (supra). In view of the foregoing, the levy of penalty in relation to the aforesaid two additions sustained by the Tribunal, does not survive. 5.2 In the light of aforesaid view taken by us, the issues raised in the remaining grounds become purely academic. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO, subsequently, imposed penalty for furnishing inaccurate particulars of income. The learned CIT(A) rightly observed that concealment of particulars of income and furnishing of inaccurate particulars thereof sometimes overlap, more so when the assessee did not co-operate during the assessment proceedings. Even otherwise the learned Authorised Representative did not demonstrate as to how the decisions relied upon by him in that connection were applicable to the peculiar facts and circumstances of the instant case. In these circumstances, ground Nos. 2(i), 2(v) and 2(vi) are dismissed. 6. In view of the foregoing, considering the totality of facts and circumstances of the case as also findings of the Tribunal in quantum appeal, we are of the opinion that levy of penalty in relation to additions sustained by the Tribunal on account of jewellery (Rs. 2,12,494 according to the AO or Rs. 1,76,048 as per assessee) and in respect of amount of Rs. 3,50,000 towards construction expenses on the property of Shri F.K. Vora, is not justified. Therefore, we have no hesitation in reversing the findings of the learned CIT(A) and cancelling the penalty levied under s. 271(l)(c) of the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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