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TMI Blog2006 (9) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Laws (Amendment) Act of 1975." 3. Rival contentions have been heard and record perused. The brief facts of the case are that the assessee filed its return of income declaring a loss at Rs. 78,28,451 which was subsequently assessed under s. 143(3) on 30th Sept., 2003 determining the loss at Rs. 50,32,719, after making a disallowance under s. 40(a)(i) of Rs. 9,25,568 and making an addition of Rs. 18,70,164 on account of deferred revenue expenditure. The AO observed that a sum of Rs. 9,25,568 was paid as web hoisting charges and software in foreign currency; however, no deduction at source was made by the company under s. 195 of the Act which it was supposed to do. Similarly, a sum of Rs. 18,70,164 was disallowed, being deferred revenue expenditure debited to the P L a/c which is approximately 50 per cent of the cost of website purchased from Burgundy Trading (P) Ltd. It has been observed that the payment made for purchase of website was incurred to commence the sale of flowers through internet which was the principal source of income of the assessee. The expenditure was of non-recurring nature and provided an enduring benefit to the assessee for a number of years. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fails to offer any explanation or fails to substantiate any explanation/claim made by him, then the amount added/disallowed in computing total income shall be deemed to represent the income in respect of which particulars have been concealed. The AO observed that the case of the assessee falls under the Expln. 1 to s. 271(1)(c) of the Act and, therefore, held the assessee-company to be in default for furnishing inaccurate particulars of its income and imposed a penalty of Rs. 11,05,712 @ 100 per cent of the tax sought to be evaded. 8. There is no dispute to the well-settled legal proposition that the penalty proceedings are distinct and different from assessment proceedings. Findings in the assessment proceedings are not conclusive. The entire material available should be considered afresh by the authorities before imposing penalty under s. 271(1)(c). The Explanation to s. 271(1)(c) provides a rule of evidence raising a rebuttable presumption in certain circumstances. No substantive right is created or annulled thereby. The substantive law relating to levy of the penalty is preserved. The initial burden of proof is cast on the assessee to establish the presumption arising in ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was animus i.e., conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. The Explanation has no bearing on factor No. 1 but it has bearing only on factor No. 2. The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If an assessee gives an explanation which is unproved but not disproved i.e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. Alternatively, treating the Explanation as dealing with both the ingredients (i) and (ii) above, where the circumstances do not lead to the reasonable and positive inference that the assessee's explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. Absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of certain expenses claimed by the assessee are disallowed by an authority, it cannot mean that particulars furnished by the assessee were wrong. It was held that mere disallowance of expenses per se cannot mean that assessee has furnished inaccurate particulars of its income. Concealment involved penal action, it has to be proved as a conscious act. The issue under reference is squarely covered by the above decision. We, therefore, do not find any infirmity for deletion of penalty imposed on account of disallowance of expenses incurred by the assessee, the genuineness of which were not doubted and particulars to which were correctly furnished by the assessee along with the return of income and the explanation furnished before the AO was bona fide. 11. With regard to reliance placed by CIT(A) on the decision of Prithipal Singh Co., we are inclined to agree with the contention of senior Departmental Representative, Mr. B.P. Mishra, that this judgment is not applicable to the asst. yr. 2001-02, under our consideration, after amendment in s. 271(1)(c) by the Direct Tax Laws (Amendment) Act of 1975. As per Mr. Mishra, the penalty prescribed is relatable to "the amount of tax sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provided for the same. As the Finance Act, 2002, made the amendment in s. 271(1)(c) w.e.f. 1st April, 2003, it cannot be said that the amendment was clarificatory and, therefore, retrospective in operation. Therefore, the only inference that can be drawn is that the legislature did not intend to effect the amendment in s. 271(1)(c) retrospectively. In view of above, having regard to the amendment made by Taxation Laws (Amendment) Act, 1915, and by Finance Act, 2002, for the asst. yr. 2001-02, under appeal penalty cannot be levied under s. 271(1)(c) as the returned income and assessed income are undisputedly loss. 14. We have considered rival contentions. A plain reading of the relevant provisions makes it clear that the liability to penalty arises if any person has concealed the particulars of his income or furnished inaccurate particulars of such income. The liability for penalty is not in any manner linked with whether total income assessed is positive or negative. Or, to put it differently, whether any tax is payable on the total income assessed. The expression "the amount of tax sought to be evaded" is not to be considered in general terms because a specific meaning has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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