TMI Blog2016 (8) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... ;C' in ITA No.278/Ahd./2004 for the Assessment Year :1992-1993. 2. While admitting the matter on 27.08.2009, the following substantial question of law was framed by the Court for consideration :- Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) and thereby canceling the penalty imposed u/s. 271(1)(c) of the Act, when quantum additions stood confirmed? 3. The facts of the case are as under :- The assessee is a company engaged in the manufacturing and sale of cloth. In the above case, an order imposing minimum penalty u/s. 271(1)(c) of the Act, i.e. ₹ 21,06,225/- was passed by the Assessing Officer on 28.03.2003 for furnishing inaccurate particulars. The assessee filed an Appeal before the CIT (Appeals) against the above order of the Assessing Order but the CIT (Appeals) confirmed the order of penalty. Aggrieved by the order of the CIT (Appeals), the assessee filed an Appeal before the Appellate Tribunal whereby the Appellate Tribunal deleted the penalty imposed u/s.271(1)(c) of the Act. 4. Learned Counsel for the appellant Department Mr. Nitin K. Mehta has submitted that the Tribunal has seriously co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible that the assessee had received the payment of ₹ 20,40,000/- out of the sum of ₹ 20,40,000/- paid by him. This explanation given by the assessee cannot be regarded to be a false explanation until and unless, in our opinion, the Revenue proves that the explanation given by the assessee is false. In our opinion, no penalty u/s.271(1)(c) can be imposed on the assessee. Even this fact has also borne out of the show cause notice as well as observation made in para 6.5 of the assessment order that the assessee has received the sum of ₹ 20,40,000/- from RB Rodda Co. We have also gone through the decision of the Hon. Gujarat High Court in the case of National Textile v. CIT 249 ITR 125 (Guj) on which the learned AR has vehemently relied. 13. In the case of National Textile v. CIT 249 ITR 125 (Guj) the question before the Hon'ble Gujarat High Court was about the levy of penalty u/s. 271(1)(c) in respect of the addition made u/s. 68 by recourse to explanation 1 below section 271(1)(c). In this case the Hon'ble Gujarat High Court while holding the imposition of penalty was not justified observed :- In order to justify the levy of penalty, two, factors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.3. Reliance was also placed on a decision of this Court; (I) in the case of National Textiles v. Commissioner of Income-tax reported in 249 ITR 145 and paragraphs 19 to 22 of the decision reads as under :- 19. In the quantum proceedings, the explanation of the assessee in relation to cash credits was not accepted and found to be false. The accountant was not produced and the explanation that relations with him are strained was also found to be an unjustifiable excuse. In the assessment, it was also taken into consideration that the assessee had tried to square up the credit entries to conceal the particulars of income. Only 2 credit entries were explained and regarding the remaining entries, there were no documents or evidence brought on record. The names of parties from whom the temporary loans were obtained were not furnished. 20. The question before us is whether the above mentioned facts which resulted in addition of the cash credits as income of the assessee in themselves, without any further evidence, are sufficient for imposition of penalty by recourse to Explanation 1 of section 271(1)(c) as it stood in the relevant assessment year or at the time when the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( ii ) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. The Explanation has no bearing on factor No. (i) but it has bearing only on factor No.( ii ). The explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If an assessee gives an explanation which is unproved but not disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the department because there will be no material to show that the amount in question was the income of the assessee. (II) The decision of this Court in the case of BTX Chemicals (P.) Ltd. v. Commissioner of Income-tax reported in 288 ITR 196 and Paragraphs 25 and 29 of the said decision reads as follows :- 25. So far as the deletion of penalty referable to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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