TMI Blog2010 (12) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) confirmed the assessment order, the assessing officer called for explanation from the assessee as to why concealment penalty u/s 271(1)(c) of the Act should nto be imposed on the assessee. Rejecting the explanations filed by the assessee vide letters dated 10-12-1992 and 09-03-1993 that the assessee had filed appeal before the Tribunal against the order CIT(A) and therefore the penaty proceedings may be kept in abeyance, the assessing officer for the detailed reasons mentioned at paragraph 6 to 7 of his order u/s 271(1)(c) dated 27-04- 1993 has held that the assessee has concealed the income and thereby committed an offence u/s 271(1)(c) of the Act and therefore, he imposed a penalty of ₹ 3,76,702. Assessee challenged the order u/s 271(1)(c) of the Act before the CIT(A). The CIT(A) allowed the appeal of the assessee by cancelling the penalty with the following findings: 3.8 On perusal of facts, I find that the additions u/s 68 in respect of cash credit and interest on cash credits were made and confirmed as the appellant was not able to discharge the primary onus and the evidences placed on record by it were considered as insufficient and the Hon ble ITAT vide orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated cash credits to the tune of ₹ 6,90,256 as non genuine and interest thereon amounting to ₹ 90,900 was also added. He submitted that the CIT(A) was not justified in cancelling the penalty as even the Tribunal has upheld the addition to the extent of ₹ 5,97,903. The ld.DR therefore emphatically stated that the assessee concealed the income to that extent by showing bogus cash credits in the names of those parties. The ld.DR prayed that the order of the CIT(A) may be set aside and that of the assessing officer may be restored. 5. The ld.AR, on the other hand, submitted that the penalty was levied on the basis of addition made in assessment order dated 26-03-1992. The addition was confirmed by the CIT(A) in the order passed ex parte. When the matter travelled before the Tribunal, the addition in respect of four creditors aggregating to ₹ 1,33,000 was deleted. He submitted that the assessee had furnished all the evidences in respect of the parties, the cash credits of which were not found acceptable to the assessing officer. In most of the cases the assessee has filed the confirmation letters and had also produced the parties before the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raisal of facts and circumstances, there should be found a conscious and willful default on the part of the assessee which results in unlawful withholding of revenue. By no stretch f imagination, mere failure f the assessee can be equated with such conscious and willful default. The burden of proof lies on the assessee to prove that asessee had acted in a bona fide manner and there is no conscious default. The non bona fide conduct of the assessee should be apparent from the facts and circumstances and it should not be digged out by applying theories of probabilities and assumptions. Unless explanation of the assessee are held as false and non bona fide, penalty is not attracted. This view is fortified by the judgment of Hon ble Gujarat High Court in the case of CIT vs. National Textile 249 ITR 125 (Guj) where the levy of penalty with reference to section 68 was considered. Therefore, considering the totality of the circumstances, we are not inclined to accept the version of the department that the assessee tried to introduce its undisclosed income through introducing bogus cash credits. 7. The proceedings under section 271(1) (c) can be initiated only if the A.O or the first Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Apex Court in the case of Reliance Petroproducts Pvt.Ld. (322 ITR 158) has considered some other cases of the Apex Court on the issue at page 164 and 165 and observed as under:- In Dilip N. Shroff v. Jt. CIT [2007] 6 SCC 329, this Court explained the terms concealment of income and furnishing inaccurate particulars . The Court went on to hold therein that in order to attract the penalty under section 271(1)( c), mens rea was necessary, as according to the Court, the word inaccurate signified a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term inaccurate particulars was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing accurate particulars. It was further held that the assessee must be found to have failed to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons would operate when there is concealment of particulars of income or a failure of duty to disclose fully and truly particulars of income, imposed under the Act and the Rules there under. The duty is enjoined upon a person to make a correct and complete disclosure of particulars of his income and it is only when he fails in his duty by not disclosing particulars of his income or part thereof, he conceals the particulars of his income. The duty is enjoined upon him to make a complete disclosure of particulars of his income as well as a correct disclosure. Therefore, if the disclosure made of the particulars of income is incorrect, then also he commits breach of his duty. Such defaults entail the penal consequences contemplated by section 271(1) (c). 12. There cannot be a straight jacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and indeed concealment of particulars of income and in accurate particulars of income may at times overlap. It depends upon the facts of the each case. In the assessment proceedings the AO while ascertaining the total income chargeable to tax would be in a position to detect the specific or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt the income in respect of which particulars have been concealed. 14. 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 computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, the amount of freight did not fall within the definition and was not liable to be included in the taxable turnover. This was the reason why the assessee did not include the amount of freight in the taxable turnover in the returns filed by it. The court further held that it was a highly arguable contention which required serious consideration by the court and the belief entertained by the assessee that it was not liable to include the amount of freight in the taxable turnover, could not be said to be mala fide or unreasonable. What section 43 of the Madhya Pradesh General Sales Tax Act, 1958, requires is that the assessee should have filed a false return. Where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a false return inviting imposition of penalty. The court held that if the view canvassed on behalf of the revenue were accepted, the result would be that even if the assessee raises a bona fide contention that a particular item is not liable to be included in the taxable turnover, he would have to show it as forming part of the taxable tu ..... 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