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TMI Blog2009 (2) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier the matter came up before the ITAT vide ITA No. 299/Mum./01 for assessment year 1993-94 order dated 24-9-2002 wherein the ITAT sent the matter back to the file of CIT(A) with fresh decision with certain directions which are reproduced by the CIT(A) at page Nos. 1 & 2, are extracted below :-- "The penalty has been confirmed by the learned CIT(A) solely on the ground that additions have been sustained in appeal. He has not gone into the question whether the evidence and material on the basis of which additions were made and sustained, are adequate for the purpose of levying penalty under section 271(1)(c) of the Income-tax Act. It is an established position of law, that even if new evidences are not placed during the course of penalty proceedings, the material already available has to be reappraised during the course of penalty proceedings under section 271(1)(c). It is true that as contended on behalf of the Department, Explanation 1 will be applicable. However, there has to be a finding as to whether the explanation offered by the assessee can be said to be bona fide and also whether all material facts were disclosed by the assessee. The explanation given by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty under section 271(1)(c) in the facts and circumstances of the instant case as discussed above. Hence, the penalty imposed is deleted." 4. The learned DR has relied upon the order of Assessing Officer and submitted that the burden of proof is necessary to prove that failure to return correct income was not due to fraud, wilful or gross neglect on the part of the assessee. The learned DR submitted that in the case under consideration the assessee has failed to discharge his burden, therefore, the Assessing Officer has rightly levied penalty under section 271(1)(c). The learned DR, in support of his contention, relied upon the judgment of Hon'ble P&H High Court in the case of CIT v. Sardar Store [1986] 161 ITR 53. 5. The learned AR on the other, hand, relied upon the order of CIT(A) and submitted that the assessee has discharged his burden of proof. The addition made in respect of cash credit, the learned AR submitted that originally the addition made at Rs. 2,38,500 which has been reduced by the CIT(A) to Rs. 1,72,500 and finally the ITAT has reduced to the extent of Rs. 1,53,500. The learned DR drew our attention to page 100 of assessee's paper book and submitted that duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sum mentioned in sub-clause (iii) of clause (c). The expression used in clause (c) is 'has concealed the particulars of his income' or 'furnished inaccurate particulars of such income'. Therefore, both in cases of concealment and inaccuracy the phrase 'particulars of income' are used. It will be noted that as regards concealment, the expression in clause (c) is 'has concealed the particulars of his income' and not 'has concealed his income'. The expressions "has concealed the particulars of income" and "has furnished inaccurate particulars of income" have not been defined either in section 271(1)(c) or elsewhere in the Act. One thing is certain that these two circumstances are not identical in detail although they may lead to the same effect, namely, keeping off a certain portion of income. The former is direct and the latter may be indirect in its execution. 6.1 The word "conceal" is derived from the latin concelare which implies con+celare to hide. Webster in his New International Dictionary equates its meaning "to hide or withdraw from observation, to cover or keep from sight; to prevent the discovery of; to withhold knowledge of". The offence of concealment is thus a direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed manner. Not only is he obliged to furnish return of his income, meaning thereby to disclose fully and truly all his income, but he is also required to set forth 'other particulars' as may be prescribed. The word 'prescribed' as defined by section 2(33) means, 'prescribed by the rules under the Act'. The forms are, accordingly, prescribed by the rules framed under the Act. Section 140 lays down as to by whom such return can be signed and verified. 6.3 Rule 12 of the rules framed under the Act prescribe the forms in which the return of income is required to be furnished. The return is required to be verified in the manner indicated in the form. By such verification the assessee declared to the best of his knowledge and belief that the informa-tion given in the return and the annexure and statements accompanying it was correct and complete and that the amount of total income and other particulars shown therein were truly stated and related to the previous year relevant to the assessment year in question. It was also to be stated therein on solemn declaration that no other income accrued or arose or was received by the assessee and that there was no other income including in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and development rebate was also to be submitted as per section 2 of Annexure III. At the end of the form the prescribed verification was required to be made, inter alia, to the effect that the information given in the return and the Annexure and the statements accompanying it was correct and complete and that the amount of total income and other particulars shown were truly stated and related to the previous year relevant to the assessment year. A statement was also required to be made that no other income accrued or arose to or was received by the assessee. It will, thus, be seen that the form of return of income included a variety of particulars to be disclosed and the particulars of income to be disclosed can be seen against the items which related to disclosure of income besides particulars other than those which related to the income of the assessee, such as his name, address, status, etc. The forms of returns are obviously prepared in the context of the duty of a person to disclose his income from various sources under various heads of income as statutorily provided and his duty to disclose his total income in the return. The extent of his total income will determine the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson who has made the return, to produce accounts, documents or furnish verified information in writing including statement of all assets, etc. However, where the ITO is satisfied that the return is correct and complete, as were the wordings of section 143(1) at the relevant time, he had to assess the total income without requiring the presence of the assessee or production by him of any evidence that the return is correct and complete, as laid down in section 143(1). Where, however, the ITO was not satisfied without the presence of the assessee or production of evidence that 'the return is correct and complete', he was required to issue notice enabling the assessee to produce evidence on which he may rely in support of the return. The 'total income' is, in such cases of regular assessment assessed after hearing the evidence adduced and considering all material gathered by the ITO as provided in section 143(3). It, therefore, follows that in the assessment proceedings under section 143(2)(3), the ITO can find out whether the return of income was correct and complete. If he holds that the return of income was not correct or that it was not complete in respect of the particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the ITO found that the dish/income prepared by the assessee is in accordance with test of law he may accept as it is. If the ITO found that the dish prepared by the assessee is not in accordance with law he can prepare such dish in accordance with law on the basis of raw material furnished by the assessee. Under these circumstance if test of sweet dish is some different than the dish prepared by the assessee, it cannot said the assessee has concealed the particulars of his dish/income or has furnished inaccurate particulars of such dish/income. If the assessee prepared Namkin Salt dish where sweet dish was required and furnished salt to Assessing Officer instead of sugar, in these circumstances that case is certainly a case of concealed the particulars of his dish/income or has furnished inaccurate particulars of such dish/income. 6.6 There cannot be a straitjacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and indeed concealment of particulars of income and in accurate particulars of income may at times overlap. It depends upon the facts of the each case. In the assessment proceedings the ITO while ascertaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." 6.8 A conspectus of the Explanation makes it clear that the statute visualised the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation is a rule of evidence. Presumptions which are rebutting table in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts are within the special knowledge of the assessee. Section 106 of the Indian Evidence Act, 1872, gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessing Officer as to whether he can invoke the Explanation or not. Explanation 1 comes into operation when, in respect of any facts material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of his total income have been disclosed by him. 6.11 As regards the judgment in case of Sardar Store ( supra) on which the reliance has been placed by the DR, we find that this case is not helpful to the case of the revenue as in the said case the facts are entirely different. In the case under consideration, the assessee has discharged its burden by submitting the necessary explanation. The Assessing Officer has invoked Explanation 1(A) to section 271(1)(c) which provides that where in respect of any facts material to the computation of the total income of any person under this Act, such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false, penalty under section 271(1)(c) is leviable. In the case under consideration, the facts material to the computation of total income is three items as noted above. The assessee has furnished the explanation and the same is reiterated by the learned AR in his argument. We notice that there is no finding of the Assessing Officer that the explanation offered by the assessee is found to be false. In the light of the above discussion, we find that the CIT(A) has rightly cancelled the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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