TMI Blog2016 (12) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to assessment year 2007-08 against levy of penalty under section 271(1)(c) of the Income Tax Ac t, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1] The learned CIT(A) erred in confirming the levy of penalty u/s 271(1)(c) of ₹ 13,80,438/-. 2] The learned CIT(A) erred in levying the penalty in respect of the addition u/s 68 of ₹ 40,98,148/- made on account of unexplained cash credits from three persons on the ground that the assessee had not disclosed all the material facts relating to the said cash credits and thus, the assessee had concealed the particulars of his income and hence, the levy of penalty was justified. 3] The learned CIT(A) erred in holding that that the explanation furnished by the assessee was found to be false and therefore, the explanation 1 to section 271(1)(c) was attracted in the case of the assessee and hence, the levy of penalty was justified. 4] The learned CIT(A) failed to appreciate that the said amount of ₹ 40,98,148/- was actually paid by the three creditors on behalf of the assessee towards purchase of scrap from auction and subsequently, the assessee had also mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/-, totaling ₹ 40,98,148/- under section 68 of the Act. The Assessing Officer noted that the assessee was making cash payments to MSRTC in the auctions held at various places and the amounts were shown in the names of said persons. Where the assessee had failed to prove the identity of the creditors, genuineness of the transaction as well as creditworthiness of said creditors to make such huge payments on behalf of the assessee, the addition was made in the hands of assessee under section 68 of the Act, which was upheld by the CIT(A). It may be pointed out herein itself that the assessee had filed an appeal before the Tribunal in ITA No.1242/PN/2011 , relating to assessment year 2007-08 and vide order dated 20.05.2013, the Tribunal noted that the assessee had failed to furnish any confirmation from the creditors to prove any identity. The assessee was in the business of scrap and bidding auctions of MSRTC. The payments were shown in the names of different persons but the auctions were taken by the assessee. The assessee claimed that the said payments were made by those identified persons and the Tribunal in this regard held that the burden was upon the assessee to prove w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbers provided were found to be invalid after verification. Even the addresses provided by the appellant were found to be incomplete which prevented any further scope of enquiry, The appellant thus was not able to prove the identity of the editors, genuineness of the transactions as well as creditworthiness of the said creditors to justify such huge payments on behalf of the appellant. In the appeal filed by the appellant before the ITAT Pune, the tribunal while confirming the addition made u/s 68 held that the appellant failed to discharge the burden cast on him and nothing has been placed on record to controvert the findings of the CIT(A). Thus the appellant has not been able to prove the genuineness of the credit at any stage and section 68 expect the assessee to prove not only the identity of creditors but also to prove the nature and source of the amounts. The aforesaid addition has been made after properly examining the fact and also after due verification of the details furnished by the appellant. The contention now being raised by the appellant is with respect to the merits of the quantum matter and issue involved which has already been considered earlier at all stages inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Vs ITO (2008) 298 ITR 106 (P H), which also held that mens rea is apparent. The reliance placed by the appellant on the judicial decisions are seen to be on a different set of facts which is not applicable to the facts of the present case and hence the same are distinguishable. In fact the decision of the Karnataka High Court in the case of CIT Vs Manjunatha Cotton Ginning Factory, ITA No. 2564 of 2005 order dated 13.12.2012, the Karnataka High Court has dealt with various principles governing penalty. It has been held that for the applicability of section 271(1)(c), conditions stipulated therein must exist and the facts as brought out above clearly show that the conditions u/s 271 (1 )(c) exist and hence the levy of penalty is justified. 4.2.2 Thus as per the provision of Explanation-1, the onus to establish that the explanation offered was bona fide and all facts relating to the same and material to the computation of his income have been disclosed by him will be on the person charged with concealment. The explanation of the assessee for the purpose of avoidance of penalty must be an acceptable explanation. The burden is on the assessee. If he fails to discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty can be levied only in the event the factors enumerated in clause (A) and (B) of explanation 1 are satisfied and a finding in this behalf is arrived at by the Assessing Officer and the legal fiction created there under would be attracted. The facts of the present case as brought out on record lead to the conclusion that the penalty u/s 271(1)(c) is attracted. In the present case, the appellant has not disclosed all the material facts relevant for its assessment. There is material to suggest that the appellant has not disclosed the relevant particulars or facts before the authorities and has not acted bona fide. In these facts of the case, penalty can be levied under section 271 (1)(c) of the I.T. Act. Therefore, the application of Explanation 1 to section 271(1)(c) can come into operation as the two conditions as required to be satisfied before applying the explanation gets satisfied viz. a) Such person fails to offer an explanation or offers an explanation which is found by the assessing officer to be false or b) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide. In the instant case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation 1 to section 271 (1)(c) of the Income Tax Act, 1961 is clea rly attracted in case of the appellant. On facts of the case, it is absolutely clear that the appellant has failed to rebut this presumption of concealment contained in Explanation 1 to section 271(1)(c) by adducinq relevant, reliable and cogent material in this regard. It is, therefore, clear that all the facts relating to the explanation for the income in respect of which penalty has been imposed have not been disclosed by the appellant. The appellant has also failed to disclose all the facts material to computation of total income. In view of the above, the explanation of the appellant for not showing the income in the return, which are subject matter of penalty u/s. 271 (1)(c) cannot be said to be bonafide. It is, therefore, held that the appellant has committed default contemplated u/s. 271(1)(c) of the Income Tax Act, 1961 and the learned Assessing Officer was justified in facts and in law to hold that appellant's case is fit for imposition of penalty u/s. 271 (1)(c) of the Income Tax Act, 1961. Accordingly, it is held that the Assessing Officer is fully justified in imposing penalty of ₹ 23,77, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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