TMI Blog2016 (3) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee with penalty. We have perused the assessment orders, i.e., dated 04.02.2007 as well as 29.12.2010 passed u/s 143(3) and 143(3) r.w.s. 263 of the Income-tax Act. We find that the Assessing Officer nowhere independently analyzed the material or the evidences collected by Excise Authorities. He simply proceeded against the assessee on the basis of information collected from Excise Authorities. The nature of that information has never been analyzed for the purpose of making addition to the income of the assessee. That type of evidence cannot be relied upon for the purpose of visiting the assessee with penalty. The degree of evidence ought to be of a little higher standard, because the penalty proceedings could expose the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturing and trading of Rolls etc. Machinery Parts. It has filed its return of income on 28.12.2006 declaring total income at ₹ 2,53,076/-. An assessment order was passed u/s 143(3) on 04.12.2007 determining the total income at ₹ 2,76,980/-. On perusal of the assessment records, the learned Commissioner has harboured a belief that the assessment order is erroneous and prejudicial to the interest of Revenue; therefore, action u/s 263 of the Income-tax Act was taken. The learned Commissioner has set aside the assessment order vide his order dated 17.03.2010 with a direction to reframe the assessment order. The learned Assessing Officer has passed the fresh assessment order on 29.12.2010 u/s. 143(3) r.w.s. 263 of the Act. He determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t automatically authorize the Assessing Officer to visit the assessee with the penalty. The Assessing Officer in the original assessment proceedings verified the books of accounts of the assessee and did not make any addition. In the set aside assessment order, the Assessing Officer has simply relied upon the information collected from Excise Authorities, but did not examine the material collected by the Excise Authority himself. Thus, according to the learned Counsel for the assessee, no case for visiting the assessee with the penalty is made out. 6. On the other hand, ld. Departmental Representative supported the orders of the learned Revenue Authorities below. He contended that all these aspects have duly been considered by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) such person offers an explanation which he 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, 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 . 9. A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied, that the assessee has; (i) co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation 1 append ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of visiting the assessee with penalty. The degree of evidence ought to be of a little higher standard, because the penalty proceedings could expose the assessee with prosecution also. Merely the assessee did not dispute with Excise Authorities does not mean that, in case of penalty proceedings if it challenges the very basis of addition, it will be denuded from his rights to challenge the nature of evidence. In our opinion, the evidence relied upon by the Assessing Officer does not falsify the explanation of the assessee as discernable from the note no.2 of the Auditors Report prepared u/s 44AB of the Act. In view of the above discussion, we allow the appeal of the assessee and delete the penalty. 11. In the result, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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