TMI Blog2001 (2) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... wing total income at Rs. 99,164. The Income-tax Officer noticed various defects in the maintenance of accounts. After discussion with the Assessing Officer and finding unvouched nature of expenses, the assessee agreed for application of gross profit at the rate of 12 per cent. on contract receipts so declared by the firm, to be taken as assessable income and, accordingly, the assessee's income came to Rs. 1,27,680. In respect of the said additions, the Assessing Officer, taking support from Explanation 1 appended to section 271(1)(c)(iii), initiated penalty proceedings against the assessee for levying penalty, by raising the presumption under the explanation that the additions made in the total income returned, represent the income in respect of which particulars have been concealed and ultimately levied penalty on finding that some of the expenses, referred to in the order, having been not properly explained equal to the amount of income, held to be such in respect of which particulars have been concealed. The said order has been affirmed by the Commissioner of Income-tax (Appeals) as well as by the Tribunal, by holding that Explanation 1 to section 271(1)(c), as amended with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of assessment also, the assessee was not possessed of full verificatory vouchers as necessary proof by which the expenses entered in the books of account could be vouched and verified. It was precisely for that reason that assessment was made by applying the agreed rate of 12 per cent. on gross receipts by the assessee under the contract, in order to avoid any further investigation and verification of the receipts and expenses in detail. Explanation 1: to section 271(1)(c), which was amended with effect from April 1, 1976, in the above form, goes to show that-to discharge the Revenue of its initial burden to establish that there was concealment of particulars of income, when additions are made in the income or any disallowance of expenses claimed by the assessee has been made. It is to be noticed in the present case that the result of the business as disclosed in the books of account having not been accepted, instead the assessing authority accepted and adopted gross receipts by the assessee as basis for applying flat profit rate, for making the assessment. That resulted in addition of Rs. 28,520 in the income of the assessee and the Income-tax Officer was justified initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing authority has assumed that hiring charges in respect thereof have been inflated. In respect of Truck No. RJJ 1114, it has been found that some diesel expenses in respect of the said truck, which belong to the sister concern of the assessee, have been debited in the books of account even during the period when the truck was not hired with the assessee and on that basis, the Assessing Officer has not found the explanations furnished by the assessee in respect of particular expenses in respect of which explanation was sought from the assessee, to have been substantiated by the assessee. It has also been stated in the order of the learned Tribunal that the explanation furnished by the assessee cannot also be considered to be bona fide in terms of the second proviso to Explanation 1 read with clause (B). The findings of the Assessing Officer have been affirmed by the appellate authorities, namely, the Commissioner of Income-tax (Appeals) as well as the Tribunal. Having considered the facts arid circumstances as emanating from the statement of case and contentions raised before us, we are of the opinion that the learned Tribunal has misdirected itself in considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to in the order of Rs. 40, Rs. 80, Rs. 1,480, etc., we are of the opinion that the findings of the learned Tribunal, that the explanation furnished by the assessee is not bonafide in the facts and circumstances of the present case, is not based on any material and is an inference which no reasonable person instructed in law would draw, particularly in cases where the asses see bas agreed for applying of gross profit rate, precisely for the reason that he was not in position to vouch for each and every detail of the expenses entered in the books of account, to substantiate the result shown by him. It may be noticed that in Explanation 1 to section 271(l)(c), as recast, while the expression "failure to return the total assessed income as not arising on account of any fraud or wilful negligence on the part of asses see" does not find place but clause (B) read with the proviso (ii) makes it abundantly clear that where the difference in the assessed income and the returned income is not arising on account Of any gross or wilful negligence on the part of assessee, still no penalty is leviable. The statute bas clearly drawn a distinction between furnishing a deliberate false explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to substantiate the explanation as a fact not proved, cannot raise a presumption about deliberate concealment and lack of bona fides. In such events, the question of bona fides has to be proved as a fact like any other fact on preponderance of probability uninfluenced with any presumption. In the first place, we find in the present case that even during the course of assessments it was not a case of rejecting the explanation furnished by the assessee, before making any additions in its income. Once no explanation was said to be tested and rejected by the Assessing Officer before convening, the question of invoking Explanation 1 itself would not have arisen however. Explanation 1 was attracted for the purpose of giving jurisdiction to the Assessing Officer for initiating the proceedings. It could not have further taken place of conclusive proof so as to discard the explanation furnished by the assessee. for the very same reason for which the result shown by him in the books of account has been rejected, not by rejecting the explanation furnished by the assessee but by accepting the explanation furnished by the assessee that he does not have necessary material to verify each and ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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