TMI Blog2013 (9) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... l the assessee has raised following grounds. 1 That the order of the ld. CIT(A) is against the facs of the case and law. The ld. CIT(A) has wrongly confirmed the penalty of ₹ 40,48,800/- imposed u/s 271(1)(c) by the ACIT, Central Circle, Chandigarh. 2. The ld. CIT(A) as well as the Assessing Officer knowing fully well that penalty proceedings are totally independent of assessment proceedings, have gravely erred in ignoring the evidence and written submissions filed by the appellant during the course of penalty proceedings and in giving grater credence to the contents of the assessment order and the order passed u/s 264 of the I.T. Act. The confirmation of the penalty by the ld. CIT(A) being perverse against the facts and law deserves cancellation. 3. The order of the ld. CIT(A) is a Non Speaking Order is as much as it has failed to take cognizance of the written submissions filed by the appellant, remand report of the Assessing Officer and the rebuttal submissions thereof dated 24.5.2011 filed during the penalty proceedings u/s 271 (1) (c) of I.T. Act and proceedings of the appeal. The ld. CIT(A) has not considered the most relevant documents and submissions. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Penalty proceedings u/s 271(1)(c) of I.T. Act were also initiated. 4 In response to the show cause notice for levy of penalty, it seems that no appearance was made before the Assessing Officer. The Assessing Officer recalled the various issues raised during the assessment proceedings that despite various opportunities no details were filed. Even PAN and names of the Director of M/s West Point Property Pvt. Ltd, was not filed. Sources of the amount deposited in the bank have not been substantiated and therefore, penalty u/s 271 (1) (c) was levied at minimum of 100% amounting to ₹ 40,60,295/-. 5 On appeal the assessee could not improve upon his case before the ld. CIT(A) who confirmed levy of penalty. 6 Before us, the ld. counsel of the assessee submitted that first of all the assessee was simply doing the business of commission agent or property agent. He was not a proper businessman and therefore, he had filed his return of income only from commission income and in this background there was no requirement for the assessee to disclose the account with Axis Bank. He further submitted that the assessee had given proper explanation regarding amount received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 696, that penalty proceedings are penal in nature and even if explanation of the assessee is false, it does not necessarily give rise to the inference that disputed amount is income. It may be noted that this case was decided for Assessment year 1947-48 and therefore, the provisions of section 28(1)(c) of I.T. Act, 1922 was applied. Thereafter in 1961 Act penalty provisions were contained in Section 271. Relevant portion of original sec 271(1)(c) which were enacted in 1961 Act reads as under: 271. Failure to furnish returns, comply with notices, concealment of income, etc.-(1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a) . (b) (c) has without reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or (d) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (i) (ii) ..; (iii) in the cases referred to in clause(c), in addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittee report . Relevant recommendations of this report have been extracted in the commentary of Income Tax Law by Chaturvedi Pithisaria s (Fifth Edition) at page 8611 to 8615. Thus through 1975 Act various explanations totaling to number four were inserted to Section 271(1)(c). For the present case only Explanation 1 is relevant which 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 Income-tax Officer or the Appellate Assistant Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate, 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; Provided that nothing contained in this Explanation shall apply to a case referred to in clause(B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1989 stating that sufficient cash balance was not available to it on the dates of the transaction, it had obtained hand loans from friends. It was expected to repay such loan within a short time and no entries were made in the books of account in respect thereof. The letter also stated that since the assessee was not able to furnish evidence for such loan, it offered the amount of ₹ 93,000 as additional income. The amount of ₹ 93,000 was assessed as unexplained income and penalty proceedings u/s 271 (1)(c) were initiated. The Assessing Officer found assessee s explanation in regard to loans un-acceptable and levied penalty u/s271(1)(c).The appeal before the first appellate authority was dismissed. On second appeal to the Tribunal, same was allowed in favour of the assessee. When the matter traveled to the Hon'ble High Court, Hon'ble High Court reversed the decision of the Tribunal. The matter traveled to the Hon'ble Supreme Court. The Hon'ble Supreme Court referred to two decisions of Bombay High Court and made following observations: In CIT v. P.M. Shah [1993] 203 ITR 792, the High Court at Bombay observed that the Explanation to section 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se provisions include the Explanation. By reason of the Explanation, where the total income returned by the assessee is less than 80 per cent. of the total income assessed under section 143 or 144 or 147, reduced to the extent therein provided, the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, unless he proves that the failure to return the correct income did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under section 271 put to notice that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and, consequently, be liable to the penalty provided by that section. No express invocation of the Explanation to section 271 in the notice under section 271 is, in our view, necessary before the provisions of the Explanation therein are applied. The High Court at Bombay was, therefore, in error in the view that it took and the Division Bench in the impugned judgment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was doubted and the matter was referred to the larger Bench of Hon'ble Apex Court. The issue was considered by the larger Bench in case of Union of India and others Vs. Dharmendra Textiles Processors and others, 306 ITR 277 (SC). The Court considered the issue of levy of penalty u/s 271(1)(c) and also Section 11AC of the Central Excise Act, 1944. The Court after detailed examination of the issue came to the conclusion that issue of levy of penalty is not an action of penal nature rather it involves the element of Strict Civil Liability . In this regard we would like to produce para 24 of the order which is as under: The Explanations appended to section 272(1) (c) of the Income-tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The judgment in Dilip N. Shroffs case [2007] 8 Scale 304 (SC) has not considered the effect and relevance of section 276 C of the Income-tax Act. The object behind the enactment of section 271(1) (c) read with the Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings are penal in nature. After various amendments as discussed above, this decision is of no assistance particularly in view of the observations made by the larger Bench of the Hon'ble Apex Court in case of Union of India and others Vs. Dharmendra Textiles Processors and others (supra) which we have quoted above. 18 Now let us see what is the nature of the explanation furnished by the assessee in the case before us. First document refer to page 2 of the paper book which is a copy of the affidavit of the assessee furnished before the Assessing Officer. Through this affidavit it was stated that the assessee along with S/Shri Pritam Singh, Rajwant Singh, Rajiv Kumar and S.S. Empire Pvt Ltd. were in mutual agreement with M/s West Point Property Pvt. Ltd. for purchase of land for M/s West Point Property Pvt. Ltd,. The payment for such purchase can be made by any of the party. Further Shri Pritam Singh transferred a sum of ₹ 1,19,90,000/- which was received from M/s West Point Property Pvt. Ltd,. to assessee s Axis Bank account No. 30201010009195 in some urgent circumstances. It is further stated that Shri Pritam Singh had received a sum of ₹ 1.20 crore from M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndigarh). During the course of assessment, the bank account statement of the said account was called for from the bank u/s 133(6) of the I.T. Act, 1961 by the A.O. The detailed discussion of transactions in Axis Bank a/c No. 30210100009591 made in the assessment order is as under:- Transaction Date Ch. No. Withdrawal Deposit Balance Narration 19.04.2006 75,00,000 75,00,000 Trf. From Pritam 20.04.2006 5,00,000 70,00,000 Self 21.04.2006 4221 70,00,000 0.00 Self 22.04.2006 44,90,000 44,90,000 Trf. From Pritam 22.04.2006 4223 44,90,000 0.00 Self 03.08.2006 1,01,000 1,00,679 Cash de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, it was stated as follows:- Regarding UTI Bank A/c, it is submitted that I have received some money from Mr. Pritam Singh vide account payee cheques for the purchase of agriculture land on behalf of West Point Properties Pvt. Ltd. in the area of Zirakpur and Derabassi. I received the money from Pritam Singh and after that I withdrawn from my account for the purchase of agriculture land. The purchased agricultural land sold to the West Point as per agreement signed. Clearly, the above two statements made by the assessee himself during the assessment proceedings and during the petition u/s 264 are contradictory and do not therefore convey the correct situation. 21 The ld. CIT(A) after extracting above observation, further observed that MOU was signed by Shri Rajiv Kumar and not by any other party including the assessee i.e. Shri Charanjit Singh. Further witnesses who have signed the documents are same those who signed three receipts. Interestingly though the above documents i.e. MOU, compromise deed and receipts was issued on different dates and entry made on diffedrent locations but the same were signed by the same Notary Public at Khanna (Punjab) on 28.8.2007. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the theory proposed by the assessee is to believe, there was nothing to prevent the assessee from returning the said amount in cheque from whom it had been received in cheque. The fact that it has been withdrawn in cash clearly shows that the intention is to block the investigation into the recipient of the said amount. Therefore assessee also fails in proving the genuineness of transaction. As such the amount credited in the assessee s bank account has been rightly assessed as his income from undisclosed sources and penalty on the same has been correctly imposed. The order of the A.O. under appeal is confirmed. We find nothing wrong with the order of the ld. CIT(A). It is to be seen that even the PAN of the Company or Shri Harish Bhasin was not furnished before the Assessing Officer. PAN of Shri Pritam Singh was not filed. In fact the details of PAN in the affidavit by Shri Harish Bhasin, detail of PAN of the company in the affidavit of Shri Harish Bhasin are left blank. Even the column regarding PAN of Shri Harish Bhasin is left blank. Even before us, nothing was filed to improve the case. These facts clearly show that the assessee has not been able to prove the genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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