TMI Blog2017 (7) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... unal was right in holding that the Explanation to Section 271(1)(c) was correctly invoked by the CIT (A) ? 2 The factual matrix, in nutshell, is as under : (a) The assessee claims to carry on the business in Draft Discounting and earns commission of ₹ 1 per thousand. (b) The Assessing Officer in his Assessment order for the year 1982-83 to 1985-86 held that the assessee has failed to prove that he carries on the business of Draft Discounting and earns commission and as such, held the income to be 5% of the deposits. The said order was purportedly passed in the year 1987. Pursuant thereto, the Assessing Officer initiated Penalty Proceedings under Section 271(1)(c) of the Income Tax Act for all these assessment years and on 21/09/1989, decided the Penalty Proceeding against the assessee holding the assessee liable to pay penalty. The said order is passed on 21/09/1989. The Assessee preferred an appeal before the Commissioner (Appeals). The said appeal came to be dismissed under Judgment and Order dated 26/02/1990. Aggrieved thereby, the assessee filed appeal before the Tribunal. The Tribunal confirmed the order imposing penalty upon the assessee. 3 The learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 2 per thousand, however the assessee could not substantiate the explanation offered. This has been held by the Tribunal. 6 The learned counsel relies on the Judgment of the Apex Court in a case of Chuharmal v. Commissioner of Income Tax, M.P. reported in Income Tax Reports Volume 172 page 250 and another Judgment of the Delhi High Court in case of Commissioner of Income Tax v. Kalindi Rail Nirman Engineering Ltd. reported in [2014]365 ITR 304 (Delhi). 7 We have considered the submissions canvassed by the learned counsel for the parties, so also, have gone through the Orders passed. The question to be considered is whether Explanation to Section 271(1)(c) of the Act could be invoked. 8 The relevant dates are as under : The Assessment Order for the year 1982-83 to 1985-86 passed by the Assessing Officer is dated 30/12/1987. The same has been confirmed by the Commissioner (Appeals) in the year 1986 and 1989. The Tribunal allowed the appeal filed by the assessee against the Orders of the Assessing Officer and the Commissioner in the Assessment Proceedings on 13/07/1993. The Assessing Officer initiated the Penalty Proceedings and passed Order holding assessee liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner 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 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 subsection, be deemed to represent the income in respect of which particulars have been concealed. In the present case, the amount has not been added to the income of the Assessee. In As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity, the assessee must have charged some extra amount and that the rate at ₹ 2/per thousand for discounting of drafts and cheques, is to be adopted. The Order of the Assessment Officer, as such, was set aside. 16 It is abundantly clear that the very basis for initiation of the Penalty Proceedings stood negated by the Order of the Tribunal in an appeal filed by the assessee against the Order of the Assessing Officer in the Assessment Proceedings. 17 The basis for initiation of Assessment Proceedings by the Assessment Officer is that the Assessment Officer disbelieved the claim of the assessee that he was engaged in the business of discounting drafts, whereas the Tribunal held that the assessee carries on the business of Draft Discounting. The assessee has stated that the amount in the account is the amount of the drafts received of which assessee charges ₹ 1/per thousand as commission. Explanation (1) to Section 271(1)(c) of the Act states that if a person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false or such person offers an explanation which he is not able to substantiate and fails to prove that such e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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