Shri Kanaiyalal C. Thakor, Valsad v. The Income tax Officer, Ward-2,, Valsad

ITA 635/AHD/2006 | 2001-2002
Pronouncement Date: 26-02-2010 | Result: Allowed

Appeal Details

RSA Number 63520514 RSA 2006
Assessee PAN AAJPT0877B
Bench Ahmedabad
Appeal Number ITA 635/AHD/2006
Duration Of Justice 3 year(s) 11 month(s) 17 day(s)
Appellant Shri Kanaiyalal C. Thakor, Valsad
Respondent The Income tax Officer, Ward-2,, Valsad
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 26-02-2010
Date Of Final Hearing 16-02-2010
Next Hearing Date 16-02-2010
Assessment Year 2001-2002
Appeal Filed On 10-03-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH JM & SHRI A.N. PAHUJA AM I.T.A. NO.635/AHD/2006 (ASSESSMENT YEAR 2001-02) SHRI KANAIYALAL C THAKOR VS ITO WARD-2 PROP OF B SEJAL GAS AGENCY VALSAD NEW VEGETABLE MARKET VALSAD [PAN : AAJPT0877B] (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE (WRITTEN SUBMISSIONS) REVENUE BY : SHRI CK MISHRA DR O R D E R A.N. PAHUJA : THIS APPEAL THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 27- 12-2005 OF THE LD. CIT(A) VALSAD UPHOLDING THE P ENALTY OF RS.1 07 355/-LEVIED U/S 271(1)(C) OF THE INCOME-TAX ACT 1961 (HEREINAF TER CALLED AS THE ACT). 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE TH AT THE RETURN DECLARING INCOME OF RS. 2 20 990/- FILED ON 30.10.2001 BY THE ASSESSEE A DEALER OF HPCL LPG COOKING GAS WAS TAKEN UP FOR SCRUTINY WITH THE ISS UE OF NOTICE U/S 143(2) OF THE ACT 25.10.2002. THE ASSESSMENT WAS SUBSEQUENTLY CO MPLETED ON AN INCOME OF RS.5 01 950/- VIDE ORDER DATED 27.2.2004 INTER ALIA WITH THE FOLLOWING ADDITIONS: (IN RS.) I) AGRICULTURAL INCOME TREATED AS INCOME FROM UNDISCLOSED SOURCES . 42 360 II) DIFFERENCE IN FREIGHT RECEIPTS 3 2 371 III) FREIGHT EXPENSES 76 627 IV) DOUBLE CLAIM OF DONATION 5 000 V) UNEXPLAINED CASH CREDIT 1 01 000 2.1 WITH REGARD TO CLAIM OF EXEMPTION OF AGRIC ULTURAL INCOME OF RS. 42 360/- THE ASSESSEE WHEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS CALLED UPON ITA NO.635/AHD/2006 2 TO PRODUCE PROOF OF OWNERSHIP OF THE LAND DOCUMENT ARY EVIDENCE OF SALE OF AGRICULTURAL PRODUCTS DETAILS OF EXPENSES INCURRED ON SEEDS LABOUR ETC. FOR CARRYING OUT THE AGRICULTURAL OPERATIONS PRODUCED MERELY A COPY OF 7/12 8A EXTRACTS OF THE LAND AND DID NOT PRODUCE ANY OTHER SUPPORTING EVIDENCE IN CONNECTION WITH THE AGRICULTURAL ACTIVITIES CLAIMED TO HAVE BEEN CARRIED OUT ON THE SAID LAND. EVEN THE 7/12 AND 8A EXTRACTS SHOWED TH AT THE ASSESSEE HELD THE LAND IN QUESTION DURING FY 2003-04 AND THERE WAS N O PROOF OF HAVING THE LAND IN THE YEAR UNDER CONSIDERATION. MOREOVER THIS LAND W AS NOT WHOLLY OWNED BY THE ASSESSEE AND THERE WERE 12 CO-OWNERS. ACCORDING TO THE ASSESSING OFFICER[AO IN SHORT] SINCE THE ASSESSEE WAS CLAIMING THE EXEM PTION ONUS WAS ON HIM TO PROVE THAT THE INCOME EARNED WAS AGRICULTURAL INCOM E. IN THE ABSENCE OF ANY EVIDENCE OF CARRYING ON OF AGRICULTURAL OPERATION S AND SALE OF AGRICULTURAL PRODUCE THE AO REJECTED THE CLAIM FOR EXEMPTION OF THE AGRICULTURAL INCOME. 2.2 AS REGARDS ADDITION OF RS.32 371/- ON ACCOUNT O F DIFFERENCE IN FREIGHT CHARGES THE AO NOTICED THAT THE ASSESSEE CLAIMED C REDIT FOR TDS AMOUNTING TO RS.20 931/- AND ON THAT BASIS THE CORRESPONDING FR EIGHT RECEIPTS WORKED OUT TO RS.9 51 313/- . THIS AMOUNT WAS NOT REFLECTED IN TH E PROFIT AND LOSS ACCOUNT. TO A QUERY BY THE AO THE ASSESSEE EXPLAINED THAT THEY H AD DEBITED RS.9 18 942/- IN THE PROFIT & LOSS ACCOUNT AS HAVING BEEN PAID TO SH RI DEEPAKBHAI B PATEL AS TRANSPORT RENT VIS--VIS FREIGHT RECEIPTS OF RS.9 5 1 313/-. SINCE THE ASSESSEE DID NOT EXPLAIN THE DIFFERENCE OF RS.32 371/- THE AO A DDED THE SAID AMOUNT. 2.3 REGARDING FREIGHT EXPENSES OF RS.76 627 THOUGH THE ASSESSEE CLAIMED THAT TRANSPORT RENT WAS PAID TO SHRI DIPAKBHAI B PA TEL THE FOLLOWING ENTRIES NARRATED AS FREIGHT WERE WITHOUT ANY NAME OF THE RE SPECTIVE PARTIES: SR.NO. DATE OF ENTRY AMOUNT (RS.) 1. 7-8-2000 18 672 2. 9.9.2000 19 655 3. 10.11.00 17 750 ITA NO.635/AHD/2006 3 4. 12.12.00 20 650 76 627/- SINCE THE ASSESSEE DID NOT OFFER ANY EXPLANATION T HE AO DISALLOWED THE AMOUNT. 2.4 BESIDES SINCE THE ASSESSEE DEBITED AN AMOUNT OF RS.5 000/- PAID TOWARDS CHIEF MINISTERS RELIEF FUND IN THE PROFI T & LOSS ACCOUNT AND ALSO CLAIMED DEDUCTION OF 100% OF THE SAME AMOUNT IN THE COMPUTATION OF INCOME THE AO ADDED THE AMOUNT CLAIMED TWICE THE ASSESSE E HAVING ADMITTED THE MISTAKE. 2.5 THE AO FURTHER NOTICED THAT THE ASSESSEE RAISED A LOAN OF RS.1 01 000/- IN THE NAME OF SHRI RAGNESH R DESAI. DESPITE SEVERAL OPPORTUNITIES THE ASSESSEE DID NOT FURNISH CONFIRMATION NOR COULD PRODUCE THE SAID CREDITOR. SUBSEQUENTLY THE ASSESSEE FILED A CONFIRMATION LETTER DATED 26-0 2-2004 SIGNED BY ONE SMT. NINA @ AMI R DESAI. THE AO NOTICED THAT AS PER THE DETAILS ACCOMPANYING THE BALANCE-SHEET THE DEPOSITOR HAD BEEN MENTIONED AS SHRI RAGHNESH R DESAI WHEREAS IN THE CONFIRMATION LETTER SMT. NINA @ AMI R DESAI IS CLAIMED TO HAVE ADVANCED LOAN OF RS.66 000 ON 1.8.2000 AND RS. 35 0 00 ON 1.1.2001 TO THE ASSESSEE THROUGH CHEQUES DRAWN ON ICICI BANK VALSAD ON FURTHER ENQUIRY IT TRANSPIRED THAT AS PER THE RETURN OF INCOME FILED BY SMT. NINA SHE HAD INCOME OF RS.47 667/- UNDER THE HEAD SALARY AND INCOME OF RS. 17 574/- UNDER THE HEAD INCOME FROM OTHER SOURCES DURING THE YEAR. SINCE SMT. NINA NEITHER APPEARED BEFORE THE AO NOR PRODUCED ANY EVIDENCE IN SUPPORT OF HER CLAIM OF HAVING ADVANCED THE LOAN IN THE MANNER STATED IN THE CONFI RMATION WHILE SHRI RAGHNESH R DESAI DENIED HAVING ADVANCED ANY LOAN TO THE AS SESSEE THE AO INFERRED THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVI NG THE CASH CREDIT. THE AO ALSO OBTAINED A COPY OF BANK STATEMENT FROM ICICI B ANK AFTER ASCERTAINING THE ACCOUNT NUMBER 00680100574OF THE ASSESSEE AND FOUND THAT ENTRIES OF RS.66 000/- AND RS.35 000/- ADVANCED BY SMT. NINA W ERE NOT RECORDED THEREIN. ACCORDINGLY THE ENTIRE AMOUNT WAS ADDED U/S 68 OF THE ACT THE ASSESSEE HAVING ITA NO.635/AHD/2006 4 FAILED TO ESTABLISH THE IDENTITY OF THE CREDITOR G ENUINENESS OF THE TRANSACTION AND CAPACITY OF THE CREDITOR . 2.6 INTER ALIA PENALTY PROCEEDINGS U/S 27 1(1)(C) OF THE ACT READ WITH EXPLANATION-1 THERETO WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AS AFORESAID. 3. THE ASSESSEE FILED AN APPEAL AGAINST ALL TH E ABOVE ADDITIONS EXCEPT THE DISALLOWANCE OF DOUBLE CLAIM OF DONATION AND THE LD . CIT(A) UPHELD THE SAID ADDITIONS. THEREAFTER IN RESPONSE TO A SHOW CAUSE NOTICE BY THE AO BEFORE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT THE ASSESSEE S UBMITTED THAT AN APPEAL HAVING BEEN FILED AGAINST THE ORDER OF THE LD CIT(A) PENA LTY PROCEEDINGS MAY BE KEPT IN ABEYANCE TILL THE DECISION OF THE ITAT. HOWEVER T HE AO DID NOT ACCEPT THIS PLEA OF THE ASSESSEE AND IMPOSED A PENALTY OF RS.1 07 35 5/- U/S 271(1)(C) OF THE ACT READ WITH EXPLANATION 1 THERETO @ 100% OF THE TAX SOUGHT TO BE EVADED FOR CONCEALING THE INCOME OR FURNISHING INACCURATE PART ICULARS THEREOF. . 4. ON APPEAL THE LD CIT(A) UPHELD THE LEVY OF PENA LTY AFTER REFERRING TO RELEVANT PROVISIONS OF SEC. 271(1)(C) OF THE ACT AN D EXPLANATION-1 THERETO IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE CASE HOLDI NG AS UNDER: 5.5 IT WOULD THUS BE SEEN THAT THE AMOUNT ADDED OR DISALLOWED IN THE ABOVE PROCESS OF COMPUTATION IS DEEMED TO REPRE SENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. IN OTHER WORDS THE ADDITION OF THE AMOUNT OR OTHERWIS E DISALLOWANCE OF THE AMOUNT IN THE COMPUTATION OF THE TOTAL INCOM E WOULD ASSURE A DEEMED CHARACTER OF CONCEALMENT BY REASON OF EXPL ANATION 1. THEREFORE THE STATUTORY REQUIREMENT OF SECTION 271 (1)(C) REQUIRING SATISFACTION OF THE OFFICER AS REGARDS CONCEALMENT GETS UNDERSTOOD IN THE LIGHT OF THE ABOVE DEEMING SITUATIONS. IN T HE PROCESS OF COMPUTATION OF TOTAL INCOME IF THE A.O. MAKES AN AD DITION TO THE AMOUNT OR IN THE OTHER PROCESS DISALLOWS SOME AMOUN T IN THE PROCESS OF COMPUTATION THE TWO EVENTS OR OCCASIONS WOULD HAVE TO BE DEEMED TO REPRESENT THE CHARACTER OF CONCEALMENT IN REGARD THERETO. ITA NO.635/AHD/2006 5 5.6 EXPLANATION 1 AUTOMATICALLY COMES INTO OPERATIO N WHEN IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSONS THERE IS FAILURE TO OFFER AN EXPLANATI ON OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALSE B Y THE ASSESSING OFFICER OR AN EXPLANATION IS OFFERED WHICH IS NOT S UBSTANTIATED. IN SUCH A CASE THE AMOUNT ADDED OR DISALLOWED IN COMP UTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 5.7 THE EXPLANATION OF THE ASSESSEE FOR THE PURPOSE OF AVOIDANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANAT ION; IT SHOULD NOT BE FANTASTIC OR FANCIFUL ONE. OTHERWISE THE C ONSEQUENCE FOLLOWS AS A MATTER OF LAW. THE BURDEN IS ON THE A SSESSEE. IF HE FAILS TO DISCHARGE THE BURDEN THE PRESUMPTION THAT HE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTIC ULARS THEREOF IS AVAILABLE TO BE DRAWN [ CIT V. PRATHI HARDWARE STORES (1993) 203 ITR 641 649-50 (ORI)] 5.8 MERE OFFERING OF AN EXPLANATION WOULD NOT ABSOL VE AN ASSESSEE FROM THE LIABILITY OF PENALTY. IT IS NECE SSARY FOR THE ASSESSEE TO OFFER AN EXPLANATION AND ALSO TO SUBSTA NTIATE IT (CIT V. LAL CHAND TIRATH RAM (1997) 225 ITR 675 683 (PUNJ) ]. 5.9 UNDER EXPLANATION 1 A PRESUMPTION WILL ARISE T HAT IF ANY ADDITION MADE BY THE ASSESSING OFFICER IS SUSTAINED BY THE APPELLATE AUTHORITY THEN THAT WILL REPRESENT THE C ONCEALED INCOME OF AN ASSESSEE AND THE ONUS WILL BE ON THE ASSESSEE TO REBUT THE PRESUMPTION. A PRESUMPTION UNDER EXPLANATION-1 IS OBVIOUSLY AVAILABLE WHEN AN ASSESSEE FAILS TO OFFER AN EXPLA NATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFI CER TO BE FALSE OR IF THE ASSESSEE OFFERS AN EXPLANATION WHICH HE I S NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FID4E AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. 6. GOING THROUGH THE FACTS OF THE CASE IT IS OBSER VED THAT THE ASSESSEE NEVER BROUGHT ANY MATERIAL ON RECORD (WHIC H MAY OR WHICH MAY NOT HAVE BEEN RELIED BY THE AO) IN SUPPOR T OF FREIGHT EXPENSES AND DIFFERENCE IN FREIGHT EXPENSES . THUS THE ASSESSEE CLEARLY FAILED TO DISCHARGE INITIAL ONUS P LACED UPON HIM BY LAW. FURTHER BOTH REPRESENTED INCOME OF THE ASSES SEE WHICH WAS NOT DISCLOSED IN THE RETURN OF INCOME. THUS BOTH OF THEM ARE CLEAR CUT CASE OF FURNISHING OF INACCURATE PARTICULARS AN D THE FAILURE TO OFFER AN EXPLANATION AND ARE THEREFORE LIABLE TO PE NALTY AS PER THE EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. I THEREFORE UPHOLD THE DECISION OF A.O. IN THESE TWO COUNTS. ITA NO.635/AHD/2006 6 6.1 IN CASE OF AGRICULTURAL INCOME THE ASSESSEE FURNISHED CULTIVATION AND OWNERSHIP EVIDENCE. HOWEVER THE E VIDENCE WERE APPARENTLY CONTRARY AND NO FURTHER EXPLANATION OR M ATERIAL WAS SUBMITTED. THUS HERE ALSO INCORRECT PARTICULARS W ERE FILED BY THE APPELLANT AND THERE WAS A DELIBERATE ATTEMPT TO CON CEAL REGULAR INCOME AS EXEMPT INCOME. HERE THE ASSESSEE OFFERE D AN EXPLANATION WHICH WAS FALSE AND ALSO WAS UNABLE TO SUBSTANTIATE THE EXPLANATION OFFERED BY HIM AND THEREFORE LIAB LE TO PENALTY AS PER THE EXPLANATION 1 TO SECTION 271(1)(C) OF THE A CT. I THEREFORE UPHOLD THE DECISION OF THE A.O. ON THIS POINT. 6.2 FINALLY IN THE MATTER OF CASH CREDIT IN THE NAME OF MR. RAGNESHBHAI DESAI THE ASSESSEE PRODUCED COPIES OF BANK STATEMENT OF SHRI RAGNESHBHAI AND SMT. NINA BEFORE C.I.T (APPEALS) SURAT WHICH SHOWED WITHDRAWALS. IT IS M ENTIONED AS TRANSFER ENTRY BUT IT IS NOT CLEAR TO WHOM IT HAS GIVEN. IN THE CASE OF ICICI BANK BULSAR A/C NO.00680000357 THE WITHD RAWAL OF RS.35 000/- WAS IN THE NAME OF B. SEJAL GAS AGENCY CONTRARY TO WHAT THE APPELLANT IS SAYING. THE APPELLANT HAS BE EN CHANGING STAND ON DIFFERENT OCCASIONS. IN THE BOOKS OF ACCO UNTS IT HAS BEEN SHOWN IN THE NAME OF SHRI RAGNESH DESAI. DURING TH E ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FURNISHED CONFIRMATIO N IN THE NAME OF NINA DESAI. NINA DESAI DID NOT APPEAR BEFORE TH E A.O. OR PRODUCED THE BANK STATEMENT. DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) SURAT COPY OF ACCOUNT OF AMI R. DESAI THE THIRD PERSON HAS BEEN FILED AND ONE OF THE WITHDRAWAL IN IT WAS A TRANSFER ENTRY. ANOTHER WITHDRAWAL WAS IN THE NAME OF B. SE JAL GAS AGENCY. FROM THE ABOVE IT IS CLEAR THAT THE APPELLANT HAS NEITHER PROVED THE IDENTITY OF THE CREDITOR NOR GENUINENESS OF THE TRA NSACTION. FURTHER IT IS NOT EVEN CLEAR AS WHO IS THE CREDITOR. THE G ENUINENESS OF THE TRANSACTION IS HIGHLY IN DOUBT IN VIEW OF THE CHAN GING STAND OF THE APPELLANT. THE APPELLANT HAS FAILED TO PROVE THE IDENTITY OF THE PERSON GENUINENESS OF THE TRANSACTION AND CAPACITY OF THE CREDITOR. THUS HERE ALSO INCORRECT PARTICULARS WERE FILED BY THE APPELLANT AND THERE WAS A DELIBERATE ATTEMPT TO CONCEAL THE INCOM E. THUS HERE THE ASSESSEE OFFERED AN EXPLANATION WHICH WAS FALSE AND ALSO WAS UNABLE TO SUBSTANTIATE THE EXPLANATION OFFERED BY H IM AND THEREFORE LIABLE TO PENALTY AS PER THE EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. I THEREFORE UPHOLD THE DEC ISION OF THE A.O. ON THIS POINT. 6.3 IN VIEW OF THE ABOVE DISCUSSION THE LEVY OF PE NALTY OF RS.1 07 355/- BY THE A.O. U/S 271(1)(C) READ WITH E XPLANATION-1 IS UPHELD. THE APPEAL OF THE APPELLANT IS DISMISSED. ITA NO.635/AHD/2006 7 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US. NONE APPEARED BEFORE US ON BEHALF OF THE ASSESSEE AND INSTEAD WRITTEN SUBMISSI ONS HAVE BEEN FILED. IN HIS WRITTEN SUBMISSIONS THE ASSESSEE AT THE OUTSET WHILE RELYING ON A DECISION OF AHMEDABAD BENCH IN THE CASE OF DY.CIT VS. GSFC LTD REPORTED IN (2010) 1 ITR (TRIB) 361 (AHMEDABAD) CONTENDED THAT WHEN PENALTY IS LEVIED FOR FURNISHING OF INACCURATE PARTICULARS EXPLANATION 1 CANNOT BE INV OKED. IT WAS FURTHER POINTED OUT THAT IN PENALTY SHOW CAUSE NOTICE THE AO STAT ED THAT HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. SINCE IT WAS NOT CLEAR WHETHER THE AO INTENDED TO LEVY PENAL TY FOR FURNISHING INACCURATE PARTICULARS OR FOR CONCEALMENT OF INCOME PENALTY O RDER IS REQUIRED TO BE QUASHED IN VIEW OF DECISION IN CIT V. MANU ENGINEERING WORK S (1980) 122 ITR 306 (GUJ) NAVINBHAI M. PATEL V. ITO (1988) 27 ITD 411 (AHD-TR IB); AND TARLOCHAN SINGH & SONS (HUF) VS. ITO (2008) 114 TTJ 82. AS REGARDS ME RIT OF PENALTY THE ASSESSEE SUBMITTED THAT RIGHT FROM THE BEGINNING A SSESSEES INCOME HAS BEEN ACCEPTED BY THE DEPARTMENT AND EVEN IN SUBSEQUENT Y EARS ALSO SUCH INCOME IS ACCEPTED. BESIDES THE AGRICULTURAL LAND IS AN AN CESTRAL PROPERTY OF THE ASSESSEE AND THEREFORE THERE IS NO CASE FOR FURNISHING OF INACCURATE PARTICULARS OF THE INCOME WHICH EMPOWERED THE AO TO LEVY PENALTY. IN THIS CONNECTION THE ASSESSEE RELIED UPON DECISION IN CIT VS. PROAGRO S EEDS CO. LTD. 296 ITR 235.AS REGARDS FREIGHT RECEIPTS AND EXPENSES THE A SSESSEE SUBMITTED THAT THE ASSESSEE IS NOT LIABLE TO SHOW ANY INCOME IN HIS RO I PERTAINING TO TDS & THEREFORE QUESTION OF TREATING RS.32 371/- AS ASSE SSEES INCOME DOESNT ARISE. LIKEWISE W.R.T. FREIGHT EXPENSES THE ENTRIES IDENT IFIED BY THE AO IN PARA NO.3 OF ASSESSMENT ORDER WERE MERE J.V. ENTRIES FOR WHICH N O CLAIM OF EXPENSES WAS MADE BY THE ASSESSEE IN HIS P & L A/C. AS REGARDS CASH CREDIT OF RS.1 01 000/- THE ASSESSEE MENTIONED THAT THE ASSESSEE HAVING F ILED LOAN CONFIRMATION OF SMT. NINA @ AMI R. DESAI BEING SPOUSES BY RELATION & BOTH ABOVE CHEQUES HAVING ISSUED FROM THEIR JOINT BANK ACCOUNT WHILE E RROR WAS COMMITTED BY THE ACCOUNTANT IN MENTIONING THE NAME OF THE DEPOSITOR PENALTY COULD NOT BE LEVIED IN VIEW OF DECISIONS IN THE CASE OF NATIONAL TEXTIL ES V. CIT (2001) 249 ITR 125 (GUJ) SHRI NIRMAL COMMERCIAL LTD VS CIT (2008) 218 CIT (BOM) 581; AND ITO VS. ITA NO.635/AHD/2006 8 RAKESH GUPTA 107 TTJ (ASR.TRIB) 909. ON THE OTHER H AND THE LD. D.R. WHILE SUPPORTING THE IMPUGNED ORDER CONTENDED THAT MALAFI DE INTENTION IS NOT RELEVANT FOR IMPOSING THE PENALTY U/S 271(1)(C ) OF THE ACT. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE. AT THE OUTSET WE NOTICE THAT THOUGH THE ASSESSEE I N HIS PAPER BOOK CLAIMED TO HAVE ENCLOSED A COPY OF PENALTY SHOWCAUSE NOTICE N O SUCH NOTICE IS FOUND AT PAGES 48 & 49 OF THE PAPER BOOK. INSTEAD A REPLY DA TED 24.2.2005 IN GUJRATI AND ITS ENGLISH TRANSALATION IS PLACED ON THESE PAGES. THEREFORE PLEA ON BEHALF OF THE ASSESSEE IN THE WRITTEN SUBMISSIONS THAT IN T HE SHOWCAUSE NOTICE THE AO STATED BOTH CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WAS NOT VERIFIABLE NOR THE L D. DR COULD THROW LIGHT ON THIS ASPECT. EVEN OTHERWISE WE FIND THAT AFTER RECEIPT OF ORDER OF THE LD. CIT(A) IN RESPONSE TO A SHOWCAUSE NOTICE ISSUED BY THE AO ON 21.12.2004 THE ASSESSEE REPLIED VIDE LETTER DATED 24.2.2005 TO KEEP THE PEN ALTY PROCEEDINGS IN ABEYANCE TILL DECISION OF THEIR APPEAL BEFORE THE ITAT AND D ID NOT FURNISH ANY EXPLANATION WHATSOEVER. THEREAFTER THE AO AFTER ABOUT TWO M ONTHS IMPOSED A PENALTY OF RS. 1 07 355/- VIDE HIS ORDER 21.4.2005.THERE IS NO THING TO SUGGEST AS TO WHETHER OR NOT THE AO ON RECEIPT OF REPLY DATED 24.2.200 5 ALLOWED FURTHER OPPORTUNITY TO THE ASSESSEE FOR HIS EXPLANATION NOR ANY SUCH E XPLANATION IS EVIDENT FROM THE IMPUGNED ORDERS OF THE AO OR THE LD. CIT(A) . IT IS NOW WELL SETTLED THAT EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT AUTOMATI CALLY COMES INTO OPERATION WHEN IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUT ATION OF TOTAL INCOME OF ANY ASSESSEE THERE IS FAILURE TO OFFER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR AN EXPLANATION IS OFFERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE THE AMO UNT ADDED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN R ESPECT OF WHICH THE PARTICULARS HAVE BEEN CONCEALED AND CONSEQUENTLY THE ASSESSEE BECOMES LIABLE TO THE PENALTY PROVIDED BY SECTION 271(1)(C ) OF THE ACT. IN NUTSHELL THE EXPLANATION SHIFTS THE BURDEN OF PROOF ON THE ASSES SEE. [K.P.MADHUSUDNAN VS. CIT 251 ITR 99(SC). IN THE PRESENT CASE THE ASSESS MENT HAD BEEN COMPLETED ITA NO.635/AHD/2006 9 ON AN INCOME OF RS. 5 01 950/- AS AGAINST RETURNED INCOME OF ONLY RS.2 20 290/- AND UNDISPUTEDLY THE ONUS WAS ON THE ASSESSEE TO S UBMIT AN EXPLANATION IN RESPECT OF THE DIFFERENCE. THEREFORE ON RECEIPT OF THE SHOWCAUSE NOTICE THE ASSESSEE WAS REQUIRED TO SUBMIT HIS EXPLANATION ON THE AMOUNT OF DIFFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME. HO WEVER THE ASSESSEE MERELY REQUESTED FOR KEEPING THE PENALTY PROCEEDING S IN ABEYANCE AND THE AO DID NOT PURSUE THE MATTER FURTHER AND WITHOUT HAVIN G ANY EXPLANATION FROM THE ASSESSEE IMPOSED THE PENALTY. IT CAN NOT BE SAID TH AT IN SUCH CIRCUMSTANCES THE ASSESSEE HAD BEEN GIVEN A REASONA BLE OPPORTUNITY OF HEARING BEFORE THE ORDER IMPOSING PE NALTY WAS PASSED. MOREOVER ADMITTEDLY WHATEVER REPLY OR DETA ILS HAVE BEEN SUBMITTED THESE WERE SUBMITTED BEFORE THE LEARNED CIT(A). TH E LEARNED CIT(A) WITHOUT CONFRONTING THE SAID REPLY AND DETAILS TO THE AO P ASSED THE IMPUGNED ORDER. IN THIS CONNECTION IT MAY BE POINTED OUT THAT THE RULES OF NATURAL JUSTICE ARE NOT CODIFIED NOR ARE THEY UNVARYING IN ALL SITUATIONS RATHER THEY ARE FLEXIBLE. THEY MAY HOWEVER BE SUMMARIZED IN ONE WORD : FAIRNESS. IN OTHER WORDS WHAT THEY REQUIRE IS FAIRNESS BY THE AUTHORITY CONCERNED. OF COURSE WHAT IS FAIR WOULD DEPEND ON THE SITUATION AND THE CONTEXT. IN THE FAC TS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT A MERE RITUAL OR E MPTY FORMALITY WILL NOT BE AN OPPORTUNITY AS CONTEMPLATED BY LAW. IT WILL BE A 'P RETENCE' OR 'MAKE BELIEVE'. THIS IS NOT A CASE OF A MERE ROUTINE OR SIMPLE MATT ER..OVER THE YEARS BY A PROCESS OF JUDICIAL INTERPRETATION TWO RULES HAVE B EEN EVOLVED AS REPRESENTING THE PRINCIPLES OF NATURAL JUSTICE IN JUDICIAL PROCESS INCLUDING THEREIN QUASI JUDICIAL AND ADMINISTRATIVE PROCESS. THEY CONSTITUTE THE BASIC E LEMENTS OF FAIR HEARING HAVING THEIR ROOTS IN THE INNATE SENSE OF MAN FOR FAIRPLAY AND JUSTICE. JUSTICE SHOULD NOT ONLY BE DONE BUT SHOULD MANIFESTLY BE SEEN TO BE DO NE. 6.1. IN VIEW OF THE FOREGOING ESPECIALLY WHE N NO EXPLANATION HAD BEEN FURNISHED BY THE ASSESSEE BEFORE THE AO NOR FAIR OP PORTUNITY HAD BEEN ALLOWED BY THE AO BEFORE IMPOSING PENALTY U/S 271(1)(C) OF THE ACT IN THE INTEREST OF SUBSTANTIAL JUSTICE THE IMPUGNED ORDER IS SET ASI DE AND THE MATTER IS REMITTED ITA NO.635/AHD/2006 10 BACK TO THE AO FOR FRESH DISPOSAL AFTER GIVING S UFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. THE AO MAY THEREAFTER PASS SUCH ORDER AS HE DEEMS PROPER IN ACCORDANCE WITH LAW. THE ASSESSEE IS ALSO DIRECTE D TO SUBMIT HIS EXPLANATION BEFORE THE AO. WITH THESE DIRECTIONS GROUNDS RAISE D IN THE APPEAL ARE DISPOSED OF. 7. IN THE RESULT APPEAL IS ALLOWED BUT FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26-2-2010 SD/- SD/- (MAHAVIR SINGH) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED :26 TH FEBRUARY 2010 PK/- COPY TO: 1. THE ASSESSEE 2. ITO WARD-2 VALSAD 3. CIT(A) VALSAD 4. CIT VALSAD BY ORDER 5. DR D BENCH DEPUTY REGISTRAR ITAT AHMEDABAD