Smt. Vandana Yadav, Baroda v. The Income tax Officer, Ward-1(2),, Baroda

ITA 1947/AHD/2006 | 1995-1996
Pronouncement Date: 18-02-2010 | Result: Dismissed

Appeal Details

RSA Number 194720514 RSA 2006
Assessee PAN ITACT1961T
Bench Ahmedabad
Appeal Number ITA 1947/AHD/2006
Duration Of Justice 3 year(s) 5 month(s) 12 day(s)
Appellant Smt. Vandana Yadav, Baroda
Respondent The Income tax Officer, Ward-1(2),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 18-02-2010
Date Of Final Hearing 09-02-2010
Next Hearing Date 09-02-2010
Assessment Year 1995-1996
Appeal Filed On 06-09-2006
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI T. K. SHARMA JM AND D.C.AGRAWAL AM ITA NO. ASST. YEAR 1941/AHD/2006 1994-95 1942/AHD/2006 1995-96 1943/AHD/2006 1995-96 1944/AHD/2006 1995-96 1945/AHD/2006 1992-93 1946/AHD/2006 1994-95 1947/AHD/2006 1995-96 1. SHRI VINAYKR. YADAV C/O. VIVEK ROADLINES R/15 HARERAM COMPLEX OPP. POST OFFICE BARODA V/S . INCOME-TAX OFFICER WD-2(4) BARODA. 2. SHRI VINAY KR. YADAV BARODA. -DO- 3. SHRI VINAY KR. YADAV BARODA -DO- 4. SHRI RAKESH KR. YADAV BARODA -DO- 5. SMT. VANDANA YADAV BARODA -DO- 6. SMT. VANDANA YADAV BARODA -DO- 7. SMT. VANDANA YADAV BARODA -DO- APPELLANT BY :- SMT. URVASHI SHODHAN AR RESPONDENT BY:- SHRI M. C. PANDIT SR. DR 2 O R D E R PER BENCH. THESE ARE SEVEN APPEALS FOR DIFFERENT ASSESSMENT Y EARS FILED BY THREE ASSESSES THREE BY SHRI VINAY KUMAR YADAV O NE BY SHRI RAKESH KUMAR YADAV AND THREE BY SMT. VANDANA YADAV AGAINS T CONFIRMATION OF LEVY OF PENALTY UNDER SECTION 271(1 )(C) OF THE INCOME-TAX ACT 1961. 2. THE FACTS OF THE CASE ARE THAT THERE IS A FIRM B Y THE NAME M/S VIVEK ROADLINES IN WHICH FOUR PERSONS NAMELY SHRI VINAY KUMAR YADAV SHRI RAKESH KUMAR YADAV SMT. VANDANA YADAV AND SHRI SUNIL KUMAR YADAV WERE PARTNERS. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS OF THE FIRM FOR ASST. YEAR 1 995-96 THE AO NOTICED THAT THERE WERE OPENING CREDIT ENTRIES I N THE CAPITAL ACCOUNT OF THE PARTNERS IN KIND VIZ. TRUCKS INTRODUCED IN THE FIRM RESPECTIVELY VALUING AT RS.4.45 LACS RS. 4.0 LACS 8.70 LACS AND RS.3.5 LACS TOTALING TO RS.20.70 LACS . IN ADDITION THERE WERE CASH CREDIT ENTRIES AGGREGATING TO RS.11 .83 LACS IN THE NAMES OF THESE FOUR PARTNERS IN THE BOOKS OF TH E FIRM. THE FIRM FAILED TO PRODUCE ANY EVIDENCE IN SUPPORT OF T HE CAPITAL INTRODUCTION OF RS.11.83 LACS. THE ASSESSMENT WAS C OMPLETED UNDER SECTION 144 ON 23.09.1998 AND WAS SUBSEQUENTL Y SET ASIDE BY LD. CIT(A)-III BARODA ON 31.03.1999. IN T HE SET ASIDE PROCEEDINGS OPPORTUNITIES WERE GIVEN TO THE ASSESSE E FIRM AS WELL AS PARTNERS BUT INTRODUCTION OF CASH AMOUNTING TO RS.11.83 LACS WAS NOT EXPLAINED AND ACCORDINGLY THI S SUM WAS ASSESSED IN THE HANDS OF THE FIRM ON SUBSTANTIVE BA SIS UNDER 3 SECTION 68 AND ON PROTECTIVE BASIS IN THE HANDS OF THE FOUR PARTNERS BY TAKING A RECOURSE UNDER SEC. 147. LD. C IT(A) CONFIRMED THE ASSESSMENT ON SUBSTANTIVE BASIS IN TH E HANDS OF THE PARTNERS BUT ALSO ACCEPTED THE EXPLANATION TO T HE EXTENT OF RS.9 62 610/-. THE MATTER TRAVELED TO THE TRIBUNAL WHICH DELETED THE ADDITION FROM THE HANDS OF THE FIRM ENT IRELY BUT CONFIRMED THE ADDITION IN THE HANDS OF THE PARTNERS BY PARTIALLY REVERSING THE ORDER OF LD. CIT(A) AS UNDER :- SL.NO. NAME OF THE PARTNER ADDITION UPHELD BY THE HON.ITAT FOR ASST. YEAR 1995-96 1. SHRI VINAY YADAV RS.2 50 000/- PARA 24(I) 2. SMT. VANDANA YADAV RS.NIL PARA 16 3. SHRI SUNIL YADAV RS.1 55 000/- PARA 31(I) 4. SHRI RAKESH YADAV RS.1 50 000/- PARA 27(I) 3. IN ADDITION TO CASH CREDIT IN RESPECT OF WHICH T HE ADDITION WAS CONFIRMED IN THE HANDS OF PARTNERS AS ABOVE THERE WAS INTRODUCTION OF CAPITAL IN KIND BY THE PARTNERS IN THE FIRM. THIS T RANSFER IN KIND VIOLATED THE PROVISIONS OF SECTION 45(3). THE DIFFERENCE OF VALUE OF THE TRUCKS CREDITED IN THE CAPITAL ACCOUNT AND WRITTEN DOWN VA LUE OF THE TRUCKS WAS BROUGHT TO TAX. THOUGH THE ADDITION WAS DELETED BY THE LD. CIT(A) BUT WAS RESTORED BY THE TRIBUNAL AS UNDER :- SL.NO. NAME OF THE PARTNER ADDITION MADE U/S 45(3) AS UPHE LD BY THE HON. ITAT FOR ASST. YEAR 1995-96 1. SHRI VINAY YADAV RS.1 00 000/- PARA 24(II) 2. SMT. VANDANA YADAV RS.2 60 000/- PARA 17 3. SHRI SUNIL YADAV RS.1 40 000/- PARA 31(II) 4. SHRI RAKESH YADAV RS.2 80 000/- PARA 27(II) 4 4. IN ADDITION TO APPLICATION OF PROVISIONS OF SECT ION 45(3) THE AO HAD FURTHER FOUND INVESTMENT IN THE TRUCKS MADE BY THE PARTNERS. FOLLOWING ADDITIONS WERE CONFIRMED BY THE TRIBUNAL IN RESPECT OF INVESTMENT IN THE TRUCKS:- SL.. NO. NAME OF THE PARTNER ADDITION U/S 69 AS CONFIRMED BY ITAT ASST. YEAR 1995-96 ADDITION U/S 69 AS CONFIRMED BY ITAT ASST. YEAR 1994-95 1. SHRI VINAY YADAV - RS.2 37 500/- PARA 20 2. SMT. VANDANA YADAV - RS.2 62 500/- PARA 13 3. SHRI SUNIL YADAV RS.1 24 600 PARA 31(II) - 4. SHRI RAKESH YADAV RS.1 26 500 PARA 28 - 5. FOURTH ITEM OF ADDITION RELATES TO ADDITION UNDE R SECTION 44AE. THE PARTNERS HAD NOT DECLARED ANY INCOME FROM TRUCK PLY ING WHICH WAS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 44AE. THE TRIBUNAL FINALLY CONFIRMED THE FOLLOWING ADDITIONS IN THE HANDS OF THE PARTNERS:- SL.. NO. NAME OF THE PARTNER ADDITION U/S 44AE AS CONFIRMED BY ITAT ASST. YEAR 1995-96 ADDITION U/S 44AE AS CONFIRMED BY ITAT ASST. YEAR 1994-95 ADDITION U/S 44AE AS CONFIRMED BY ITAT FOR ASST. YEAR 1996-97 1. SHRI VINAY YADAV - RS.4 000 PARA 21 24 000/- 2. SMT. VANDANA YADAV - RS.28 000 PARA 14 - 3. SHRI SUNIL YADAV RS.24 600 - - 4. SHRI RAKESH YADAV RS.24 000 - 24 000/- 6. IN ADDITION TO THESE FOUR ITEMS AO NOTED IN THE CASE OF SMT. VANDANA YADAV AN INVESTMENT OF RS.4 LACS WAS FURTHE R MADE IN THE PURCHASE OF THE TRUCK IN ASST. YEAR 1992-93 WHICH W AS NOT SATISFACTORILY EXPLAINED. THE TRIBUNAL HOWEVER GAVE THE BENEFIT OF PROBABLE 5 ACCUMULATED SAVINGS OF RS.1 LAC AND CONFIRMED THE A DDITION OF RS.3 LACS UNDER SECTION 69. 7. THE AO INITIATED PENALTY PROCEEDINGS UNDER SECTI ON 271(1)(C). IN RESPONSE TO SHOW CAUSE NOTICE A COMMON REPLY WAS FU RNISHED WHICH IS REPRODUCED BY THE AO IN HIS PENALTY ORDER. FOR THE SAKE OF CONVENIENCE WE REPRODUCE THE SAME AS QUOTED BY THE AO IN THE PE NALTY ORDER IN THE CASE OF VINAY KUMAR YADAV FOR ASST. YEAR 1995-96 WH ICH IS AS UNDER :- I AM IN RECEIPT OF LETTER DATED 6-5-2005 FOR PENAL TY PROCEEDINGS U/S 271(1)(C) FOR A.Y. 95-96. RELEVANT FACTS OF THE CASE ARE AS UNDER : ASSESSEE HAD FILED HIS RETURN AT KANPUR DECLARING T OTAL INCOME OF RS.L0000/- THE ASSESSING OFFICER BARODA HAS INITIATED PENALTY PRO CEEDINGS U/S.271(1)(C} ON THE ADDITION MADE IN THE ASSESSMENT ORDER. THE DETAILS IS AS UNDER: ADDITION U/S.69 ; 437500 U/S.44AE : 4000 TOTAL ADDITION : 441500 AGR. INCOME : 20000 THE ASSESSEE HAS PREFERRED APPEAL TO HONBLE CIT(A) AND AGAINST THE ORDER OF CIT(A) APPEAL WAS PREFERRED TO THE HON'BLE ITAT AND AGAINS T THE ORDER OF CT(A) DEPARTMENT HAS ALSO FILED APPEAL TO HON. LTAT AND ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE APPEAL FILED BY THE DEPARTMENT. AO DISBELIEVED THE ASSESSEES EXPLANATION AND HAS A DDED RS.437500 AND ALSO ESTIMATED U/S.44AE RS.4000/- AS INCOME OF THE ASSES SEE. RELEVANT OBSERVATIONS OF THE ITO IN ORDER IS READ A S UNDER: FOR ADDITION U/S.69; THE SOURCES OF FUNDS FOR INVESTMENTS IN TRUCK WERE VERIFIED AT LENGTH DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S VIVEK ROADLINES AND IT WAS FOUND THAT ASSESSEE WAS UNABLE TO EXPLAIN SOURCE OF THESE INVE STMENT. IT IS THEREFORE DECIDED (REFER PARA 10 OF ASSTT. ORDER OF M/S VIVEK ROAD LI NES) TO ADD THE AMOUNT OF INVESTMENT OF RS.437500/- IN THE TOTAL INCOME OF AS ST. YEAR 1994-95 U/S 69 OF THE ACT IN THE CASE OF ASSESSEE. AN ADDITION OF RS.437500/- IS THEREFORE MADE U/S 69C OF THE IT ACT 1961 TO THE TOTAL INCOME OF THE ASSESSEE. AFTER IT THE ASSESSES REPRODUCED THE ORDER OF HON. C1T(A) WHICH HAS NO RELEVANCE AT THIS STAGE AS HE SAID ORDER STANDS MERGED WITH THE ORDER OF HONBLE ITAT. FURTHER 6 THE ASSESSEE HAS ALSO OBJECTED VIDE REPLY DATED 9- 6-2005 AGAINST LEVYING OF PENALTY U/S.271(1)(C). THE SAID REPLY IS REPRODUCED BELOW. PENALTY U/S.271(1)(C) SHOULD NOT BE LEVIED BECAUSE OF THE FOLLOWING FACTS. NOWHERE THE ID ITO HAS POINTED OUT THAT THE ADDITI ON WILL HE TREATED AS A CONCEALED INCOME OR INACCURATE PARTICULARS OF INCOME ATTRACTI NG PENALTY U/S 271(1)(C) OF THE ACT. IT IS ONLY ON THE PAGE OF HIS ORDER THE AO HAS MENT IONED THAT ISSUE SHOW CAUSE NONCE FOR LEVY OF PENALTY UI'S.271(1)(C) OF THE ACT. ' SO FROM THE ABOVE IT IS CLEAR THAT THE PROCEEDINGS WERE INITIATED WITHOUT RECORDING THE REQUISITE SATISFACTION. THE ASSESSEE IS A PARTNER IN THE FIRM M/S VIVEK RO ADLINES. THE SOURCES OF INCOME IS FROM THE AND INCOME FROM TRUCK PLYING THE AO BARODA HAS INITIATED PENALTY PROCEEDINGS U/ S.271(1)(C) ON THE ADDITIONS MADE IN THE ASSESSMENT ORDER. DETAILS IS AS UNDER: ADDITION U/S.69 ; 437500 U/S 44AE : 4000 TOTAL ADDITION : 441500 AGR. INCOME : 20000 ASSESSING OFFICER DISBELIEVED THE ASSESSEES EXPLAN ATION AND HAS ADDED RS.4 37 500 AND ALSO ESTIMATED U/S 44AE RS.4000/- AS INCOME OF THE ASSESSEE. FOR ADDITIONS U/S 69 THE SOURCES OF FUNDS FOR INVESTMENTS IN TRUCK WERE VERIFIED AT LENGTH DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S VIVEK ROADLINES AND IT WAS FOUND THAT ASSESSEE WAS UNABLE TO EXPLAIN SOURCE OF THESE INVE STMENT. IT IS THEREFORE DECIDED (REFER PARA 10 OF ASSTT. ORDER OF M/S VIVEK ROADLIN ES) TO ADD THE AMOUNT OF INVESTMENT OF RS.437500/- IN THE TOTAL INCOME OF ASST. YEAR 94 -95 U/S 69 OF THE ACT IN THE CASE OF ASSESSEE. AN ADDITION OF RS.437500/- IS THEREFORE M ADE U/S 69C OF THE IT ACT 1961 TO THE TOTAL INCOME OF THE ASSESSEE. ADDITION WAS MADE ON ACCOUNT OF ADDITION U/S 69. TH E ASSESSEE EXPLANATION THAT IT WAS REFLECTED IN THE BOOKS OF ACCOUNTS MAINTAINED BY HI M VIZ. RECEIPT AND PAYMENT ACCOUNT CAPITAL ACCOUNT AND BALANCE SHEET FOR EACH FINANCIAL YEAR. THE AO VIDE HIS ORDER MADE AN ADDITION OF THE AMOUNT OF RS.461500/- IN THE TOTAL INCOME AND PASSED THE ORDER. SO FROM THE ABOVE IT IS DEAR THAT NOWHERE THE LD IT HAS POINTED OUT THAT THE ADDITION HE TREATED AS CONCEALED INCOME OR INACCURATE PARTIC ULARS OF INCOME ATTRACTING PENALTY U/S.271(1)(C) OF THE ACT. IT IS ONLY ON THE LAST PA GE OF HIS ORDER THE AO HAS MENTIONED THAT SHOW CAUSE NOTICE FUR LEVY OF PENALTY U/S 271( L)(C) OF THE ACT. 7 THE PROVISIONS OF SEC.271(1)(C) OF THE INCOME-TAX A CT 1961 CONTEMPLATE RECORDING OF A SATISFACTION BY THE AO WHICH WOULD FORM THE BASIS OF DISCRETIONS EXERCISABLE BY SUCH AUTHORITY UNDER THE PROVISIONS. THE DISCRETION THAT IS INDICATED BY THE LEGISLATURE BY USING THE EXPRESSION MAY IS OF WIDE CONNOTATIO N. IT IS SETTLED CANNOT OF INTERPRETED JURISPRUDENCE THAT THE DISCRETION VESTE D IN THE AUTHORITIES PERFORMING PARTICULARS QUASI JUDICIAL OR JUDICIAL FUNCTIONS HA S TO BE EXERCISED FOR JUST AND PROPER REASONS AND IN CONSEQUENCE WITH THE SETTLED PRINCIP LES OF LAW. SO FROM THE ABOVE. IT IS CLEAR THAT PROCEEDINGS WE RE INITIALED WITHOUT RECORDING THE REQUISITE SATISFACTION ' RELIANCE IS PLACED ON THE JUDGEMENT OF CIT VS. BTR SHARM DELHI REPORTED IN (2005) 275 ITR 303. HEAD NOTE OF THE CASE IS READ AS UNDER : PENALTY -CONCEALING OF INCOME - ASSESSING OFFICER MUST RECORD HIS SATISFACTION THAT THERE HAS BEEN CONCEALMENT OF INCOME - ASSESSMENT O RDER NOT STABLING CONCEALMENT OR FURNISHING- NO EVIDENCE OF CONCEALMENT- PENALTY CAN NOT BE LEVIED- INCOME TAX AD 1961 SEC. 271(1)(C) THE HON. DELHI HIGH COURT IN THE CASE OF C1T VS. RA M COMMERCIAL ENTERPRISES LTD. (2000) 246 ITR 568 AND DIWAN ENNTERPRISES (2000) 24 6 ITR 571 WHERE AFTER DISCUSSING THE MATTER AT SOME LENGTH THE COURT HEL D AS UNDER (PAGE 578): IN SPITE OF THE ABOVE SAID PLEA OF THE PETITIONER H AVING BEEN REJECTED THE PENALTY IMPOSED U/S.271{1)(C) HAS STILL TO BE SET ASIDE THO UGH FOR A DIFFERENT REASONS AND BECAUSE THE VERY FOUNDATION FOR INITIATION OF THE P ENALTY PROCEEDINGS IS CONSPICUOUS BY ITS ABSENCE. THE OPENING CLAUSE OF SUB-SECTIO N (1) OF SECTION 271 ITSELF CONTEMPLATES FINDING AS REGARD SATISFACTION OF AVAI LABILITY OF GROUNDS UNDER CLAUSE BEING RECORDED DURING THE ASSESSMENT PROCEEDINGS. R ECENTLY IN CIT VS. RAM COMMERCIAL ENTERPRISES LTD. (ITC NO.13 OF 1996 DECI DED ON OCTOBER 8 1998 SINCE REPORTED IN (2000) 246 ITR 568 (DELHI) FOLLOWING TH E LAW LAID DOWN BY THEIR LORDSHIPS OF THE SUPREME COURT IN DM MANASVI VS. CI T (1972) 86 ITR 557 AND CIT VS. S.V. ANGIDI CHETTIAR (1962) 44 ITR 739 (SC) WE HAVE HELD THAT UNLESS REQUISITE SATISFACTION WAS RECORDED IN THE PROCEEDINGS UNDER THE ACT WHICH WOULD MEAN THE ASSESSMENT PROCEEDINGS THE JURISDICTION TO INITIATE THE PENALTY PROCEEDINGS COULD NOT HAVE BEEN EXERCISE. SATISFACTION HAS TO BE BEFORE T HE ISSUE OF ISSUE OR INITIATION OF ANY STEPS FOR IMPOSING PENALTY. IN THE CASE AT HAND WE FIND THE AO HAVING NOWHERE RECORDED TILL THE CONCLUSION OF THE ASSESSMENT PROC EEDINGS HIS SATISFACTION THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOM E OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THIS IS A JURISDICTION DEFECT WHICH CANNOT BE CURED. THE INITIATION OF THE PENALTY PROCEEDINGS WAS ITSELF BA D AND CONSEQUENTLY ALL THE SUBSEQUENT PROCEEDINGS LEADING UPTO THE PASSING OF THE PENALTY ORDER MUST FAIL. CWP NO.3869 OF 1997 IS THEREFORE LIABLE TO BE ALLOWED. IT IS CLEAR FROM THE ABOVE REFERRED JUDGMENT THAT T HE CONSISTENT VIEW OF THIS COURT HAS BEEN THAT THE AO IS UNDER AN OBLIGATION TO RECORD S ATISFACTION PRIOR TO THE INITIATION OF THE PENALTY PROCEEDINGS IN TERMS OF SECTION 271(1)( C) OF THE ACT. THE ORDER OF THE AO SHOULD APPARENTLY SHOW THAT THERE IS APPLICATION OF MIND. APPLICATION OF MIND CAN ONLY BE GATHERED BY THE REASONS STATED IN THE ORDER AND REFERENCE TO OTHER RECORDS MAY NOT BE VERY RELEVANT FOR THIS PURPOSE. THE SATISFAC TION CONTEMPLATED U/S 271(1)(C) OF 8 THE ACT MAY BE SUBJECTIVE BUILT IT MUST BE ARRIVED AT OBJECTIVELY SO THAT THE UNDERLINING OF THESE PROVISIONS WHICH WOULD REQUIRE THE STRICT CONSTRUCTION. THE PROVISIONS BEING PENALTY IN NATURE WOULD STAND FRU STRATED. IN VIEW OF THE ABOVE LEGAL POSITION I REQUEST YOUR HONOR TO CANCEL THE NOTICE U/S.271(1)(C) AND NOT TO LEVY PENALTY U/S.271 (1)(C )' 8. THE AO CONSIDERED THE REPLY BUT REJECTED IT AND LEVIED THE PENALTY IN RESPECT OF SEVEN CASES THE AMOUNT OF ADDITION SU STAINED AND FINAL AMOUNT OF PENALTY IS SUMMARISED AS BELOW: NAME OF THE ASSESSES ITA NO ADDITIONS ON WHICH PENALTY INITIALED ADDITIONS CONFIRMED BY ITAT FINAL AMOUNT OF PENALTY SUNILKUMAR YADAV LEGAL REPRESENTATIVE VINAYKUMAR YADAV AY 1995/96 1941/06 U/S 68 - RS. 3 55 000/- U/S 69 - RS. 1 24 600/- U/S 45(3)-RS.1 40 000/- U/S.44AE-RS.24 000/- RS 1 55 000/- RS. 1 24. 600/- RS. 1 40 000/- RS 24 000/- RS 1.79 800/- VINAYKUMAR YADAV A. Y. 1994/95 1942/06 U/S 69 - RS. 4 37 500/- U/S 44AE-RS. 4 000/-/- RS. 2 37 500/- RS. 4 000/- RS. 86 800/- VINAYKUMAR YADAV A. Y. 1995/96 1943/06 U/S 69-RS 3 50.000/- U/S 45(3)-RS 1 00 000/- RS 2 50 000/- RS. 1 00 000/- RS. 1 31 400/- NAME OF THE AASESSEE 1TA NO. ADDITIONS ON WHICH PENALTY INITIATED ADDITIONS CONFIRMED BY ITAT FINAL AMOUNT OF PENALTY RAKESHKUMAR YADAV A. Y. 1995/96 1944/06 U/S 68 - RS . 3 50 000/- U/S 69 - RS. 1 48. 500/- U/S45(3)-R2 80 OGQ/- U/S44AE-RS 24 000/' - RS. 1 50 000/- RS. 1 26 500/- RS. 1 00 000/- RS. 24 000/- RS 1 64 200/- VANDANA YADAV A. Y. 1992/93 1945/06 U/S 69 - RS. 4 00 000/- RS. 3 00 000/- RS. 1 55 200/- VANDANA YADAV A.Y. 1994/95 1 946/06 U/S 69 - RS. 4 62 500/- U/S 44AE-RS 28 000/' RS 2 62 500/- RS 28 000/- RS 1 I4.700/- VANDANA YADAV A. Y 1995/96 1947/06 U/S 69 -RS. 1 : 28 000/- U/S 45(3|-RS.2.60 000/- DELETED RS.2 60 000/- RS. 90 200/- 9 9. THE LD. CIT(A) CONFIRMED THE LEVY OF PENALTY; TH E REASONS ADVANCED BY HIM ARE SUMMARISED BELOW :- (1) DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE FIRM M/S VIVEK ROAD-LINES SEVERAL OPPORTUNITIES WERE AFFORDED TO T HE ASSESSEE. NUMBER OF SHOW CAUSE NOTICES WERE ISSUED BUT NO COMPLIANCE WAS MADE TO EXPLAIN THE NATURE AND SOURCE OF INVESTMENT IN THE TRUCK OR IN RESPECT OF CASH CREDITS. (2) THE CAPITAL ACCOUNT OF THE PARTNERS DID NOT RE FLECT BASIC DETAILS SUCH AS DATE AMOUNT AND MODE OF RECEIPTS OF RS.11.83 LA CS. SIMILARLY DETAILS REGARDING INTRODUCTION IN THE FORM OF TRUCK INTO CA PITAL ACCOUNT WERE ALSO NOT AVAILABLE. IN RESPONSE TO SHOW CAUSE NOTICE ISS UED BY THE AO AND EVEN AFTER LOT OF OPPORTUNITIES GIVEN NO DETAILS O F INVESTMENT IN THE TRUCK OR IN RESPECT OF CASH CREDITS WERE GIVEN. NO EXPLAN ATION WAS OFFERED AS TO WHAT DETAINED THE ASSESSEE FROM FURNISHING SUCH BAS IC DETAILS. (3) INITIALLY THE PARTNERS SOUGHT TO EXPLAIN THE FU NDS TO THE TUNE OF RS.23 LACS IN CASH AS ACCUMULATED WITH THEM OVER A PERIOD OF 13 YEARS FROM FY 1981-82 TO 1993-94 FROM EARNINGS OF BUSINES S AGRICULTURE MARRIAGE GIFTS & OTHER GIFTS AND TUITION. THUS THER E WAS ACCORDING TO THE ASSESSEE PROGRESSIVE FIGURES OF ACCUMULATION OF FUN DS. (4) THEREAFTER THE FOUR ASSESSES CHANGED THEIR STAN D AND TRIED TO EXPLAIN THE SOURCE OF FUNDS FOR INVESTMENT IN THEIR CAPITAL ACCOUNT AS REPAYMENT OF LOANS EARLIER GIVEN BY THEM TO FRIENDS/RELATIVES PERSONAL SAVINGS INCOME OF HUF OR TRUST OF THE PARTNERS. THE NEW STA ND WAS INCOMPATIBLE WITH THE STAND EARLIER TAKEN AND WAS CONCOCTED AND FICTIONAL. NO EVIDENCE IN SUPPORT OF VARIOUS STATEMENTS AND EXPLANATIONS W ERE FILED. IN RESPECT OF CLAIM OF AGRICULTURAL INCOME NO EVIDENCE IN THE FOR M OF BILL FOR SALE OF AGRICULTURAL COMMODITIES ETC. WERE FILED. IN THE R ETURN OF INCOME IN ASST. YEAR 1994-95 TO 1996-97 AGRICULTURAL INCOME ONLY TO THE EXTENT OF RS.14 500/- TO RS.22 000/- IN THE CASES OF VINAY KR . YADAV SUNIL KR. YADAV AND SHRI RAKESH KR. YADAV WERE DECLARED WHERE AS AGRICULTURAL INCOME TO THE EXTENT OF RS.50 000/- ANNUAL WAS CLAI MED. IN THE CASE OF VANDANA YADAV NO EVIDENCE OF HER GIVING TUITION WAS FILED EXCEPT SOME LETTERS FROM GUARDIANS FROM FEW PUPILS. NO EVIDENCE IN RESPECT OF GIFT ON MARRIAGE ETC. WERE FILED AND THEY WERE MERELY SELF- SERVING STATEMENT. IN RESPECT OF GIFT NO CONFIRMATION LETTERS WERE FILED FROM THE DONORS. 10 (5) THE STORY OF HAVING ACCUMULATED CASH OF RS.23 L ACS OVER A PERIOD OF 13 YEARS AND KEPT IN HAND DESPITE ALL BANKING F ACILITIES IS NOT BELIEVABLE. (6) IT IS INCORRECT TO SAY THAT ADDITIONS SUSTAINED ARE MERELY ON ESTIMATE BASIS BECAUSE TRIBUNAL HAS GIVEN RELIEF BY TAKING I NTO ACCOUNT THE POSSIBILITY OF ASSESSEES HAVING RECEIVED SOME GIFT S OR HAVING SOME SAVINGS. (7) EVEN IN THE PENALTY PROCEEDINGS NO EVIDENCE OF ASSESSES HAVING PAST SAVINGS WAS FILED. LD. CIT(A) THEREAFTER DISCUSSED VARIOUS AUTHORITIES REFERRED TO BY THE LD. AR FOR THE ASSESSEE AND MET OUT SUCCESSFULLY THAT T HEY ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 10. BEFORE US LD. AR FOR THE ASSESSEE PRACTICALLY R EPEATED THE SAME ARGUMENTS AS WERE TAKEN BEFORE LD. CIT(A). TO SUMMA RISE THEY ARE AS UNDER :- (1) ADDITION SUSTAINED BY THE TRIBUNAL ARE MERELY O N ESTIMATE BASIS AND NO PENALTY CAN BE LEVIED IN RESPECT OF ADDITION SUSTAINED MERELY ON ESTIMATE BASIS. (2) SECONDLY THE ASSESSEES HAD SUBSTANTIAL EVIDENC E OF HAVING AGRICULTURAL INCOME AND PAST SAVINGS BEFORE THE TRI BUNAL BUT THAT DOES NOT MEAN THAT ASSESSEE DOES NOT HAVE SAVINGS TO THE EXT ENT CLAIMED. THE EXPLANATION FURNISHED BY THE ASSESSEE IS BONA FIDE AND MERELY IT IS NOT ACCEPTED PENALTY SHOULD NOT BE LEVIED. FOR DIFFERE NT PROPOSITIONS LD. AR RELIED ON FOLLOWING AUTHORITIES :- (1) ADDITION SUSTAINED IN QUANTUM PROCEEDINGS NO BA SIS FOR CONFIRMING PENALTY: 11 125 ITR 184 (MP) 131 ITR 619 (RAJ) 138 ITR 682 (B OM) 153 ITR 215 (MAD) 113 ITD 133 (SB( (AHD) 18 DTR 358 [ CHENNAI (TRIB)] (2) EXPLANATION OFFERED NOT ACCEPTED IS NO BASIS FO R CONFIRMING PENALTY 257 ITR 355 (GUJ) 79 ITD 26 (AHD) (3) NO RECORDING OF SATISFACTION BY AO OF CONCEALME NT 246 ITR 568 (GUJ) 275 ITR 571 (DEL) 309 ITR 143 (DEL) (4) ADDITION SUSTAINED ON ESTIMATION 249 ITR 125 (GUJ) 303 ITR 53 (P & H) SLP DISMISSE D 308 ITR 18 (ST.) SC) (5) BONA FIDE BELIEF IN RESPECT OF GENUINE CLAIM 302 ITR 43 (P & H) (6) INITIATION OF PENALTY PROCEEDINGS WITHOUT SPECI FYING WHETHER ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR GUIL TY OF FURNISHING INACCURATE PROCEEDINGS 282 ITR 642 (GUJ) 122 ITR 306 (GUJ) 11. AGAINST THIS LD. DR SUBMITTED THAT IT IS INCOR RECT TO SAY THAT ADDITIONS WERE MADE MERELY ON ESTIMATE BASIS. THERE WERE DEFINITE INVESTMENTS BY THE PARTNERS IN THE FIRM AND THERE I S NO QUESTION OF ANY ESTIMATE THEREIN. IT WAS ONLY THE SOURCE WHICH WAS NOT FULLY EXPLAINED AND ACCORDINGLY THE TRIBUNAL HAD PARTIALLY ACCEPTED THE SOURCE OF INVESTMENT. THEREFORE THOSE AUTHORITIES WHICH HAVE HELD THAT N O PENALTY CAN BE LEVIED IF INCOME IS ESTIMATED WOULD NOT BE APPLICABLE HERE BECAUSE INCOME IS ASSESSED ON DEFINITE BASIS IT IS ONLY THE EXPLANAT ION OF INVESTMENT WHICH WAS PARTIALLY ACCEPTED. THUS IN RESPECT OF PART OF INVESTMENT FOR WHICH 12 EXPLANATION IS NOT ACCEPTED THE PENALTY IS LEVIABLE UNDER EXPLANATION IB TO SECTION 271(1)(C). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN ORDER TO UNDERSTAND THE NATURE OF ADD ITION WE MAY REFER TO THE ORDER OF THE TRIBUNAL IN ITA NO.2074/AHD/2002 A ND OTHERS IN THE CASE OF M/S VIVEK ROAD-LINES AND ITS PARTNERS DECIDED ON 29.11.2004. IN THE CASE OF SMT. VANDANA YADAV FOR ASST. YEAR 1992-93 T HE ISSUE WAS ABOUT INVESTMENT OF RS. 4 LACS BY HER IN THE PURCHASE OF TRUCK ON 5.10.1991. THE TRIBUNAL ACCEPTED THE ACCUMULATED SAVINGS OF RS.1 L ACS AND SUSTAINED THE ADDITION OF RS.3 LACS WHICH REMAINED UNEXPLAINED. I N HER CASE FOR ASST. YEAR 1994-95 THE TRIBUNAL ACCEPTED THAT FOR INVESTM ENT OF RS.4 62 500/- IN PURCHASE OF NEW TRUCKS IN ASST. YEAR 1994-95 SHE WOULD HAVE ACCUMULATED SAVINGS OF RS.2 LACS ONLY. ACCORDINGLY ADDITION TO THE EXTENT OF RS.2 62 500/- WAS CONFIRMED. IN HER CASE FOR ASS T. YEAR 1995-96 COMPUTATION OF CAPITAL GAINS UNDER SECTION 45(3) WA S CONFIRMED AT RS.2 60 500/-. 13. IN THE CASE OF SHRI VINAY KR. YADAV FOR ASST. Y EAR 1994-95 THE ISSUE WAS INVESTMENT OF RS.4 37 500/- IN THE PURCHA SE OF TRUCK IN JANUARY 1994. THE TRIBUNAL ACCEPTED ACCUMULATED SAVINGS OF RS.2 LACS AND BALANCE OF RS.2 37 500/- REMAINED UNEXPLAINED. IN H IS CASE FOR ASST. YEAR 1995-96 THE ISSUE WAS INVESTMENT OF RS.3 50 000/- A S UNEXPLAINED INVESTMENT IN THE FIRM. THE TRIBUNAL ACCEPTED ACCUM ULATED SAVINGS OF RS.1 LACS AND TREATED RS.2 50 000/- AS UNEXPLAINED. 14. IN THE CASE OF SHRI RAKESH KR. YADAV FOR ASST. YEAR 1995-96 THE ISSUE WAS INVESTMENT OF RS.3 50 000/- WITH THE FIRM M/S VIVEK ROAD- LINES. THE TRIBUNAL ACCEPTED ACCUMULATED SAVINGS AT RS.2 LACS AND 13 SUSTAINED THE ADDITION OF RS.1 50 000/-. THE ADDITI ON OF RS.2 80 000/- WAS ALSO SUSTAINED BEING CAPITAL GAINS TAXABLE UNDER SE CTION 45(3). FOR ASST. YEAR 1995-96 ANOTHER ISSUE WAS OF INVESTMENT OF RS. 1 26 500/- IN THE PURCHASE OF TRUCK. SINCE ACCUMULATED SAVINGS OF RS. 2 LACS WAS ALREADY CONSIDERED IN HIS HANDS NO FURTHER BENEFIT WAS GIVE N AND ENTIRE INVESTMENT OF RS.1 26 500/- WAS SUSTAINED AS UNEXPL AINED INVESTMENT. 15. IN THE CASE OF SMT. VANDANA YADAV THE FIRST ISS UE WAS AN ADDITION OF RS.50 000/- BEING INVESTMENT IN THE FIRM. IT WAS EXPLAINED OUT OF REPAIRS AND JOB WORK AND AGRICULTURAL INCOME. THE T RIBUNAL ACCEPTED SAVINGS AT RS.2 LACS AND SUSTAINED ADDITION OF RS.1 55 000/-. ADDITION UNDER SECTION 45(3) FOR RS.1 40 000/-WAS ALSO SUSTA INED. IN RESPECT OF INVESTMENT IN THE TRUCKS ENTIRE ADDITION OF RS.1 24 000/- WAS SUSTAINED AS NO FURTHER SUM WAS AVAILABLE FOR INVESTMENT AS ENTI RE ACCUMULATED CAPITAL OF RS.2 LACS WAS ALREADY CONSIDERED WHILE ACCEPTING PART EXPLANATION FOR RS.3 50 000/-. 16. THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE E XPLANATION IN RESPECT OF INVESTMENT IN TRUCKS OR ANY CASH INVESTMENT IN T HE FIRM OR WHY INCOME FROM THE DIRECTORS WAS NOT DECLARED WHICH WAS FINAL LY ESTIMATED UNDER SECTION 44AE. IT IS A CASE WHERE INVESTMENT HAS BEE N PARTIALLY TREATED AS EXPLAINED AND PARTIALLY TREATED AS NOT EXPLAINED. T HE INCOME IS NOT ESTIMATED AS CLAIMED BY THE LD. AR FOR THE ASSESSEE BUT IT IS THE INVESTMENT IN RESPECT OF WHICH EXPLANATION WAS PART LY ACCEPTED. IT IS FOR THE ASSESSEE TO SHOW THAT IT HAD DEFINITE AND RELIA BLE EVIDENCE TO SHOW ACCUMULATED SAVINGS TO THE EXTENT FOR WHICH INVESTM ENT IS MADE IN THE FIRM BY THE PARTNERS. 14 17. A PERUSAL OF PENALTY ORDER REVEALS THAT AO HAS INVOKED EXPLANATION -1 TO SECTION 271(1)(C). THE LD. CIT(A) ALSO HELD T HAT EXPLANATION-1 IS APPLICABLE ON THE FACTS OF THE PRESENT CASE. THEREF ORE WE ARE TO EXAMINE THIS ASPECT. FOR THE SAKE OF CONVENIENCE WE REPRODU CE SECTION 271(1)(C) EXPLANATION-1 AS UNDER :- SEC. 271(1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APP EALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT IS SATISFIED THAT ANY PERSON (A). (B). (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME OR (D) HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY EXPLANATION -1 WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COM PUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEAL S) OR THE COMMISSIONER TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND [FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT A LL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM] THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING TH E TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. IN THE PRESENT CASE IT IS QUITE CLEAR THAT ASSESSEE HAS FURNISHED EXPLANATION AND THERE IS NO FINDING THAT THIS EXPLANATION IS FA LSE. THEREFORE IN OUR OPINION EXPLANATION-1A WOULD NOT BE APPLICABLE ON T HE FACTS OF THE PRESENT CASE. FOR INVOKING EXPLANATION-1B THE AO HA S TO SHOW THAT ALL THE THREE INGREDIENTS OF THAT CLAUSE ARE SIMULTANEO USLY SATISFIED. THEY ARE (I) THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE; (II) HE FAILS TO PROVE THAT SUCH EXPL ANATION IS BONA FIDE AND (III) THAT ALL THE FACTS RELATING TO THE SAME MATER IAL TO THE COMPUTATION OF 15 TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. FROM A COM BINED READING OF QUANTUM ORDERS AND PENALTY ORDERS IT HAS TO BE JUDG ED WHETHER ALL THE THREE INGREDIENTS ARE SATISFIED AND ACCORDINGLY DEE MING FICTION CREATED IN EXPLANATION-1B CAN BE INVOKED. REGARDING THE FIRST INGREDIENT OF EXPLANATION -1B WE FIND THAT EXPLANATION OF THE AS SESSEE IS THAT THEY HAD PAST SAVINGS FROM AGRICULTURE EARNING OF BUSINESS MARRIAGE GIFTS OTHER GIFTS AND/OR FROM TUITION BUT WAS NOT REALLY SUBST ANTIATED IN THE SENSE THAT ACCEPTABLE EVIDENCES IN RELATION TO THE CLAIM OF SA VINGS WERE NOT FURNISHED. HAD THERE BEEN SO IT WOULD NOT HAVE BEEN DIFFICULT FOR THE TRIBUNAL TO ACCEPT THE ACCUMULATED SAVINGS AND GIFT S AND ACCEPT THE EXPLANATION OF THE ASSESSEE ABOUT SOURCE AND INVEST MENT IN THE TRUCKS AND CASH INTRODUCED IN THE FIRM. THE ADDITION HAS BEEN SUSTAINED ONLY IN RESPECT OF THAT PORTION OF ALLEGED SAVINGS WHICH TH E ASSESSEE WAS NOT ABLE TO SUBSTANTIATE. THEREFORE IT WILL NOT BE LEGALLY CORRECT TO HOLD THAT IN PENALTY PROCEEDINGS ASSESSEE WAS ABLE TO SUBSTANTIA TE THE EXPLANATION IN RESPECT OF ENTIRE INVESTMENT WHEN IN QUANTUM PROCEE DINGS A FINDING HAS COME THAT ASSESSEE WAS NOT ABLE TO SUBSTANTIATE HIS EXPLANATION OF THE SAVINGS TO THE EXTENT FOR WHICH ADDITIONS WERE SUST AINED. ACCORDINGLY THE FIRST LIMB OF CLAUSE (B) OF EXPLANATION-1 IS CLEARL Y NOT SATISFIED. REGARDING THE SECOND LIMB WE FIND THAT EXPLANATION OF THE ASS ESSEE THAT HE HAD ACCUMULATED SAVINGS FROM BUSINESS AGRICULTURE MAR RIAGE GIFTS OTHER GIFTS AND/OR TUITION WOULD NOT BE BONA FIDE BECAUSE HE MA DE A TURN AROUND AND FURNISHED ANOTHER EXPLANATION THAT CAPITAL ACCOUNT IN THE FIRM SHOWING INTRODUCTION OF TRUCK AND OF CASH WAS REPAYMENT OF LOANS EARLIER GIVEN BY PARTNERS TO FRIENDS AND RELATIVES PERSONAL SAVINGS INCOME FROM HUF OR TRUST OF THE PARTNERS. HAD THE ASSESSEE STUCK TO ON LY ONE EXPLANATION THEN PROBABLY THERE WOULD NOT HAVE BEEN ANY MATERIAL TO HOLD AGAINST THE ASSESSEE THAT HIS EXPLANATION IS NOT BONA FIDE. FUR NISHING ANOTHER EXPLANATION WOULD CLEARLY SHOW THAT EARLIER EXPLANA TION FURNISHED BY HIM 16 WAS NOT BONA FIDE. IN EITHER CASE ADEQUATE AND ACCE PTABLE EVIDENCES WERE NOT FURNISHED. IT WAS FOR THIS REASON THAT THE TRIB UNAL IN QUANTUM PROCEEDINGS ALLOWED PARTIAL RELIEF BY ACCEPTING SOM E ACCUMULATED SAVINGS WITHOUT REFERRING TO ANY SOURCE THEREOF. THEREFORE IN OUR CONSIDERED VIEW SECOND LIMB OF CLAUSE (B) OF EXPLANATION-1 IS ALSO NOT SATISFIED. REGARDING THIRD LIMB OF EXPLANATION 1(B) WE FIND TH AT ASSESSEE HAS FAILED TO FURNISH ALL THE MATERIAL FACTS RELATING TO INTRO DUCTION OF CAPITAL IN THE FIRM AND INVESTMENT IN THE TRUCK. IN FACT IT FAILED TO INDICATE IN THE RETURN OF INCOME THAT CAPITAL GAIN IS CHARGEABLE ON TRANSF ER OF TRUCKS TO THE FIRM BY VIRTUE OF SECTION 45E AND ALSO THAT INCOME FROM PLYING OF THE TRUCK WAS REQUIRED TO BE DISCLOSED IN THE RETURN OF INCOM E WHICH WAS ULTIMATELY ASSESSED IN ACCORDANCE WITH SECTION 44AE. HERE MATE RIAL FACT WOULD ALSO MEAN INCOME ASSESSABLE TO TAX BUT NOT DISCLOSED LIK E IN THE PRESENT CASE BEING CAPITAL GAINS AND INCOME FROM PLYING OF THE T RUCKS. IN RESPECT OF INVESTMENT IN TRUCK AND INTRODUCTION OF CASH IN THE FIRM COMPLETE EVIDENCES OF ACCUMULATED SAVINGS WAS NOT DISCLOSED INASMUCH AS THERE WAS NO EVIDENCE OF ANY BANK ACCOUNT WHERE ACCUMULAT ED SAVINGS COULD BE KEPT. IN FACT THERE IS AN APPARENT FAILURE OF TH E ASSESSEES TO PROVE THAT ALL THE MATERIAL FACTS RELATING TO THE COMPUTATION OF THEIR INCOME HAVE BEEN DISCLOSED BY THEM. ACCORDINGLY IN OUR CONSIDER ED VIEW EXPLANATION 1(B) TO SECTION 271(1)(C) IS CLEARLY ATTRACTED IN R ESPECT OF ALL THE ADDITIONS SUSTAINED BY THE TRIBUNAL. 18. NOW COMING TO THE AUTHORITIES REFERRED TO BY TH E ASSESSEE BEFORE US WE NOTICE THAT DECISION OF HON. M.P. HIGH COURT IN SOHANLAL G. SANGHI VS. ADDL.CIT (1980) 125 ITR 184 (M.P.) ADDL. CIT V S. AGGARWAL MISTHAN BHANDAR 131 ITR 619 (RAJ) CIT VS. B.S. BAD VE & ANR 138 ITR 682 (BOM) CIT VS. J.K.A.RAJAPPA CHETTIAR 153 ITR 215 (MAD) RELATING TO THE PERIOD WHERE DELIBERATE OR CONSCIOUS CONCEAL MENT OF INCOME WAS 17 REQUIRED TO BE ESTABLISHED BY THE REVENUE BEFORE LE VY OF PENALTY. AFTER AMENDMENT IN THE LAW W.E.F. 1.4.1964 AND AFTER DECI SION OF HON. SUPREME COURT IN UNION OF INDIA & ORS. VS. DHARMENDRA TEXTI LE PROCESSORS & ORS (2008) 306 ITR 277(SC) WHEREIN IT IS HELD THAT PENA LTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY AND AUTHORITIES ARE NOT REQUIRED TO PROVE THE MENS REA THE REQUIREMENT OF PROVING DELIBERATIONS O R MENS REA IS NO LONGER NECESSARY. ACCORDINGLY ALL THESE AUTHORITIE S REFERRED TO BY THE LD. AR WOULD BE OF NO HELP. THE PROPOSITION THAT ADDITI ONS SUSTAINED IN QUANTUM PROCEEDINGS ARE NO BASIS FOR CONFIRMING PEN ALTY IS EQUALLY COUNTER BALANCED BY THE ARGUMENT THAT REASONING GIV EN FOR SUSTAINING ADDITION IN QUANTUM PROCEEDINGS DO CONSTITUTE RELEV ANT EVIDENCE FOR CONSIDERING TO SUSTAIN THE PENALTY. 19. THE LD. AR FURTHER REFERRED TO THE DECISION OF HON. GUJARAT HIGH COURT IN SARABHAI CHEMICALS (P) LTD. VS. CIT (2002) 257 ITR 355 (GUJ) FOR THE PROPOSITION THAT WHERE EXPLANATION OFFERED BY THE ASSESSEE IS NOT ACCEPTED THEN IT WILL NOT BE A BASIS FOR CONFERRING THE PENALTY. IN THAT CASE BUSINESS WAS TRANSFERRED TO WHOLLY OWNED SUBSIDIARY . AGREEMENT PROVIDED FOR PAYMENT OF INTEREST ON UNPAID PURCHASE PRICE. THROUGH A RESOLUTION DATE OF ACCRUAL OF INTEREST WAS SHIFTED. ON THE BASIS THAT THERE WAS NO FINDING THAT RESOLUTION WAS SHAM OR BOGUS HO N. HIGH COURT HELD THAT ALL THE RELEVANT PARTICULARS ON THE BASIS OF W HICH INCOME OF THE ASSESSEE CAN BE COMPUTED WERE DISCLOSED BY THE ASSE SSEE AND A CLAIM WAS PUT UP THAT INTEREST COULD NOT BE SAID TO BE ACCRUE D. 20. IN THE PRESENT CASE FACTS ARE DIFFERENT. THE A SSESSEE FAILED TO SUBSTANTIATE THE EXPLANATION IN RESPECT OF INVESTME NT MADE BY HIM AND ALSO MADE A TURN AROUND TO OFFER ANOTHER EXPLANATIO N. IT WAS NOT THE CASE WHERE ALL THE FACTS RELATING TO COMPUTATION OF INCO ME ARE DISCLOSED AND A 18 CLAIM OF EXEMPTION IS MADE AS WAS THE CASE IN SARAB HAI CHEMICALS (P) LTD. (SUPRA). 21. THE ASSESSEE CITED AUTHORITIES FOR THE PROPOSIT ION THAT AO HAS NOT RECORDED SATISFACTION BEFORE INITIATING PENALTY PRO CEEDINGS. THESE AUTHORITIES ARE AS UNDER :- (1) CIT VS. RAM COMMERCIAL ENTERPRISES LTD. 246 ITR 568 (DEL) (2) 275 ITR 571 (DEL) (3) 309 ITR 143(DEL) THESE AUTHORITIES ARE NO LONGER APPLICABLE IN VIEW OF SECTION 271(1)(1B) INSERTED BY FINANCE ACT 2008 WITH RETROSPECTIVE EF FECT FROM 1.4.1989. 22. LD. AR FURTHER REFERRED TO THE AUTHORITIES FOR THE PROPOSITION THAT PENALTY CANNOT BE LEVIED IF ADDITION IS SUSTAINED O N THE BASIS OF ESTIMATION. THEY ARE - (1) NATIONAL TEXTILES VS. CIT 249 ITR 125 (GUJ) (2) CIT VS. SANGRUR VANASPATI MILLS LTD. 303 ITR 53 (P& H) WHEREIN SLP HAS BEEN DISMISSED 308 ITR 18 (ST)(SC) 23. WE HAVE ALREADY DISCUSSED ABOVE THAT IT IS NOT A CASE OF INCOME ESTIMATED BUT IT IS A CASE WHERE DEFINITE INVESTMEN T WERE FOUND RECORDED IN THE BOOKS OF ACCOUNT AND FOR WHICH NO SATISFACTO RY EXPLANATION WAS FORTH-COMING. THEY ARE TAXABLE UNDER SECTION 69 TO THE EXTENT NOT FOUND SATISFACTORY. IT IS ONLY A CASE OF ESTIMATION OF AC CUMULATED SAVINGS AND NOT A CASE OF ESTIMATION OF INCOME. ACCORDINGLY THE SE AUTHORITIES ARE NOT APPLICABLE TO THE FACTS OF THE CASE. 19 24. THE NEXT PROPOSITION WHICH IS CANVASSED BY LD. AR IS THAT WHERE THERE WAS A BONA FIDE BELIEF OF THE ASSESSEE IN RES PECT OF THE CLAIM WHICH WAS GENUINE NO PENALTY COULD BE LEVIED. FOR THIS LD . AR RELIED ON THE DECISION OF HON. PUNJAB & HARYANA HIGH COURT IN CIT VS. SSP (P) LTD. 302 ITR 43 ( P& H). HOWEVER WE ARE OF THE VIEW THA T CLAIM OF THE ASSESSEE THAT IT SAVED OUT OF AGRICULTURAL INCOME O R OUT OF GIFTS ETC. COULD NOT BE SAID TO BE BONA FIDE BECAUSE IT HAS CHANGED THE STAND AND SUBMITTED ANOTHER EXPLANATION THAT IT WAS RETURN OF LOANS FRO M THE FRIENDS AND RELATIVES TO WHOM ASSESSEES HAD GIVEN MONEY EARLIER . 25. THE LAST PROPOSITION RELIED ON BY THE LD. AR IS THAT INITIATION OF PENALTY PROCEEDINGS WITHOUT SATISFACTION THAT ASSES SEE IS GUILTY OF CONCEALMENT OF INCOME OR GUILTY OF FURNISHING INACC URATE PARTICULARS OF INCOME WILL NOT BE VALID. FOR THIS PROPOSITION LD. AR RELIED ON THE DECISIONS OF HON. GUJARAT HIGH COURT IN NEW SORATHI A CO. VS. CIT 282 ITR 642 (GUJ) AND CIT VS. MANU ENGINEERING WORKS 12 2 ITR 306 (GUJ). 26. IN OUR CONSIDERED VIEW THESE AUTHORITIES WOULD NO LONGER BE APPLICABLE IN VIEW OF THE DECISION OF HON. SUPREME COURT IN THE CASE OF K.P. MADHUSUDANAN VS. CIT (2001) 251 ITR 99 (SC) WH EREIN IT HAS BEEN HELD THAT PROVISIONS OF SECTION 271(1)(C) INCLUDES EXPLANATION ALSO. BUT IN ANY CASE AO HAS INVOKED THE PROVISIONS OF EXPLANATI ON-1 TO SECTION 271(1)(C) THEREFORE ON FACTS ALSO THIS PROPOSITIO N CANVASSED BY LD. AR WOULD NOT BE APPLICABLE. THE LD. AR FURTHER RELIED ON AUTHORITIES REFERRED TO BY THE ASSESSEE BEFORE LD. CIT(A) BUT SHE COULD NOT POINT OUT AS TO HOW LD. CIT(A) WAS IN ERROR IN DISTINGUISHING ALL THOSE AUTHORITIES AND HOLDING THAT THEY ARE NOT APPLICABLE TO THE FACTS OF THE PR ESENT CASE. WE ACCORDINGLY UPHOLD THE DECISION GIVEN BY LD. CIT(A) IN NOT RELYING UPON THE AUTHORITIES CITED UPON BY THE ASSESSEE BEFORE H IM. 20 27. THUS SUMMING UP WE HOLD THAT THE FOUR ASSESSEE S ARE LIABLE FOR PENALTY UNDER SECTION 271(1)(C) READ WITH EXPLANATI ON 1(B). 28.. IN THE RESULT ALL THE APPEALS FILED BY THE AS SESSEE ARE DISMISSED. SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 18/2/ 2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 18/2/2010