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TMI Blog2016 (5) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO after recording satisfaction initiated penalty proceedings u/s 271(1)( c ) of the Act. The AO after considering the explanation and submissions of the assessee as made vide its letter dated 18.3.2013 in response to the show cause notice issued, which is reproduced in the appellate order, levied the minimum penalty at the rate of 100% of the tax sought to be evaded at Rs. 10,41,995/- by holding that the assessee had filed inaccurate particulars of income. The ld. CIT(A) also confirmed the action of the AO on the ground that the assessee filed inaccurate claim to evade true and correct tax liability. The observations and findings of the ld.CIT(A) have been incorporated at para 4 of the appeal order. While confirming the action of the AO, the ld. CIT(A) considered submissions and case law as relied on by the assessee such as CIT vs. Reliance Petroproducts (Supreme Court). (2010)322 ITR 158 (SC) and UOI v. Dharamendra Textile Processors 306 ITR 277(SC). 4. The ld. AR vehemently submitted before us that the additions as was made and confirmed by the ld. CIT(A) in quantum proceedings were tax neutral and therefore the allegation of the AO that the assessee has filed inaccurate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 20 taxmann.com 769 (Agra). The ld. Counsel also filed details showing that the said provision for discount were accepted in the assessment years 2004-05, 2005-06, 2006-07, 2008-09 and 2009-10 and only disputed during the current year i.e. assessment year 2007-08. The ld.Counsel while defending his argument submitted that since the practice was being accepted by the department right from the inception and was continued in the years subsequent and thus, the assessee was under the bonafide belief that the same were allowable in the current year as were being allowed in preceding and succeeding years. The ld. Counsel also drew our attention to the appeal order passed under section 250 (6) of the Act in respect of assessment year 2008-09 by the ld. CIT(A) in which, while drawing our attention to page No.6 para 9, an additional ground was taken qua the provisions for discount of Rs. 30,95,650/- disallowed in assessment year 2007-08 as contingent in nature and praying that it should be allowed as deductible expenses in the assessment year 2008-09. The FAA at page 7 in para 3.3 of the appeal order reproduced the assessee's submissions which reads as "the assessee submitted that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties as well as the orders of authorities below. We find that the assessee, being in the travel related business, has been regularly following the practice of accounting and creating provisions for discount on the basis of total of receivables /book debts so that the discount could be passed on those customers who makes the payment in time. Thus, the assessee used to charge discount passed on to the customers to the "provision for discount" so created and used to reverse that part of the provisions for discount which was not given or passed on the customers due to late payment by the customers. The said practice of the assessee was being accepted by the department right from the assessment year 2004-05 till assessment year 2009-10 except the assessment year 2007-08 which is under appeal before us. In the present case, we notice that a sum of Rs. 30,95,650/- was created as provision for discount in the current year out of Rs. 8,23,376/- was passed on to the customers in the subsequent assessment year 2008-09 and the balance of Rs. 22,33,724/- was reversed and offered to tax in the same year. We also find merit in the submissions of the assessee that since the said practice was fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the customers, allow the same as expenditure relating to the year under consideration because the provision has already been disallowed in the earlier year, whereas, undisputedly such discount allowed to customers is an allowable expenditure, In result, the ground of appeal is treated as allowed" Further the case of the assessee is fortified and strengthened by the decision of Hon'ble Gujarat High in the case of J H Parabia (Transport (P) Ltd(supra), wherein it has been held as under : "The Tribunal found as a matter of fact that the assessee had been consistently adopting the same method of accounting, i.e. , of not including the work-in-progress for the purpose of arriving at the taxable income since the inception of the company. It had further been found by the Tribunal that this method of accounting had been accepted by the Department. It had further been recorded by the Tribunal that in these circumstances, in the case of the assessee, a limited company, there would be either nil or negligible tax effect when one considered the fact that an item of work-in-progress which was not shown in year number one was reflected as income in any one of the subsequent years when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed the particulars of his income' or 'furnished inaccurate particulars of such income'. Therefore, in both cases of concealment and inaccuracy the phrase 'particulars of income' are used. As regards concealment, the expression in clause (c) is 'has concealed the particulars of his income' and not 'has concealed his income'. The expressions 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271(1)(c) or elsewhere in the Act. One thing is certain that these two circumstances are not identical in detail although they may lead to the same effect, namely, keeping off a certain portion of income. The former is direct and the latter may be indirect in its execution. [Para 5] The word 'conceal' is derived from the latin concelare which implies concelare to hide. Webster in his New International Dictionary equates its meaning '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 port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut each concealment or inaccuracy of particulars of income, would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected. [Para 5.1] In addition to main provisions of concealment 'has concealed the particulars of his income' or 'has furnished inaccurate particulars of such income' are deemed to represent the income in respect of which particulars have been concealed. The deemed concealment is provided in Explanations. Often a question arise whether in cases where additions or disallowances are made by the ITO, the penal provisions of section 271(1)(c ) would attract.Explanation 1 takes care of this situation. [Para 5.2] A conspectus of the Explanation makes it clear that the statute visualized 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 rebuttable 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 knowle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation which is bona fide and he should substantiate that explanation by some evidence with him. If he fails to do so, his explanation may be treated as untenable. But when the assessee is able to offer reasonable explanation based on some evidence, the ITO cannot invoke Part B of the Explanation, unless he has given finding based on some contradictory evidence to disapprove that explanation offered by the assessee which the assessee 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. [Para 5.5] In the instant case, the assessee has furnished all relevant particulars of its income. The assessee has disclosed the complete facts in the books of account and return of income though it may not have correctly taken this amount for the purpose of computation of total income in accordance with law. It is duty of the Assessing Officer to compute total income in accordance with law on the basis of particulars filed by the assessee. Under these circumstances, it cannot be said that the assessee has furnished inaccurate particulars of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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