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TMI Blog2010 (5) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... rutiny and a notice was issued under section 143(2) of the Act, in response to which, Shri G.P. Mehta, Authorised Representative appeared from time-to-time and furnished relevant details. Assessment was thereafter completed by determining net taxable income at Rs. 47,53,290 and simultaneously penalty proceedings were initiated on the ground that assessee concealed the income/furnished inaccurate particulars of income which is evident from the following additions/disallowances : 1. Disallowance of depreciation on building and machinery Rs. 6,84,109 2. Addition made under section 145A Rs. 4,41,002 3. Fee's paid to Sandeep Solanki for Valuation of Bldg. & Machinery Rs. 12,000 4. Disallowance out of salary & wages Rs. 1,57,340 5. Disallowance of discount on sale Rs. 7,98,692 6. Addition made under section 68 on account of unsecured loan Rs. 11,50,728 3. While the proceedings were pending, assessee preferred an appeal against the additions/disallowances and the learned CIT(A)-V, Mumbai has partly allowed the appeal filed by the assessee by virtually sustaining all the major additions. Having regard to the Order passed by the learned CIT(A), another opportunity was giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the genuineness of the alleged discount and, hence, the amount disallowed has to be treated as concealed income of the assessee. 8. As regards the addition made by the Assessing Officer under section 68 of the Act, the case of the assessee was that loan confirmations were filed and creditors responded to the letters written by the Assessing Officer by confirming the credits in writing; Summons having not been issued it cannot be said that the assessee had failed to prove the genuineness of the loan transactions. The Assessing Officer, however, observed that only some creditors have filed affidavits. Moreover, the Assessing Officer issued summons under section 131 of the Act in the month of January, 2003 but nobody attended. Since preliminary onus is upon the assessee, in the absence of proving creditworthiness, the Assessing Officer concluded that assessee had concealed income by filing inaccurate particulars. 9. Accordingly, he levied penalty of Rs. 12,44,269 under section 271(1)(c) of the Act. 10. Aggrieved, assessee contended before the CIT(A) that penalty was levied without recording satisfaction, during the course of assessment proceedings, in regard to concealment of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of disallowance made under section 68 of the Act. In fact confirmations were filed and parties have not been proved to be non-existent or not having creditworthiness. 13. Aggrieved, revenue is in appeal before us. Learned DR submitted that in view of explanations to section 271(1)(c) of the Act, upon making a disallowance/addition, onus is to on the assessee to prove that it is not concealed income and he has not furnished inaccurate particulars of income. In the absence of discharging the burden effectively, penalty is imposable consequent to the additions/disallowances made in the assessment order. 14. Adverting our attention to para 5.2 of the Order of learned CIT(A), learned DR submitted that penalty was cancelled on the wrong assumption that the Assessing Officer has to discharge the burden of proof. It may be noticed that the learned CIT(A) observed that the Assessing Officer has not examined the purpose of use of the plant and machinery even during the appellate proceedings and merely rested his decision on the assessment order. However, order passed by the Assessing Officer under section 271(1)(c) of the Act shows that the assessee failed to produce any docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as page 4 of the penalty order to submit that the assessee has not submitted confirmations from the parties to whom discount has been allowed and it had failed to prove the genuineness of the alleged discount. Learned CIT(A), however, wrongly assumed that onus to prove the genuineness of a claim is upon the revenue in penalty proceedings. 18. With regard to addition made under section 68 of the Act, learned DR adverted our attention to pages 23 and 24 of the assessment order and also pages 5 and 6 of the penalty order to submit that summons issued have been returned by the postal authorities and the Assessing Officer further noticed that most of the persons are small agriculturists who were not capable of lending such huge amounts to the assessee. It was also pointed out that the agriculturists had no assets worth mentioning and, thus, the assessee failed to prove the source of the credit as well as creditworthiness of the lenders which compelled the Assessing Officer to arrive at a conclusion that loan creditors were not genuine. Even during the penalty proceedings, no evidence was placed by the assessee whereas the learned CIT(A) proceeded to find fault in the assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed income or he has not furnished inaccurate particulars of such income. Explanation 1 to section 271(1)(c) lays down the procedure to discharge the burden as under : (a)when such person offers explanation and substantiates the same; or (b)proves that all facts are on record and material to the computation of his total income have been disclosed and explanation is bona fide. 21. When an explanation is offered, the onus stands shifted on to the revenue whereby it has to be shown that the explanation offered by the assessee is false or assessee has not been able to substantiate his explanation and failed to prove that such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have not been disclosed. It is not for the Assessing Officer to prove beyond reasonable doubt that the assessee has furnished inaccurate particulars of income or has concealed income referable to the additions/disallowances made. In the case of Union of India v. Dharmendra Textiles [2008] 306 ITR 277, Hon'ble Apex Court had an occasion to consider the scope and ambit of Explanations to section 271(1)(c) of the Act and, while noticing that the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding and machineries of erstwhile proprietary concern were not put to use for the purpose of assessee's business of production of IMFL. Despite a categorical finding, the assessee had not furnished any evidence, during the course of penalty proceedings, to establish that building and machinery was used for its business. This shows that except giving a bald explanation the assessee has not substantiated the explanation or proved the bona fides of its claim. Therefore, Assessing Officer concluded that the assessee wrongly claimed depreciation on the building and machinery which was not used for business purpose and such claim had made with an intention to reduce the tax liability of the current year. 23. Learned CIT(A) observed that the Assessing Officer ought to have examined the claim during the course of penalty proceedings. In our considered opinion, the onus is upon the assessee to prove that the building and machinery was put to use. Such information would be within the personal knowledge of the assessee and the Assessing Officer cannot be called upon to prove the negative, i.e., non-user of such assets. At any rate, in view of Explanation to section 271(1)(c) of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the allegation of Special Auditor that the payment for the month of March, 2000 was made in the month of March, 2000 itself was factually incorrect and details of payment were submitted in the explanation. In other words, allegation of the Special Auditor is that payment is made for 13 months whereas fact remains that payments were made only for 12 months. Under these circumstances, merely because the explanation of the assessee-company was rejected without arriving at the conclusion that it is a false claim, penalty cannot be levied. Under these circumstances, we agree with the findings of the learned CIT(A) on this issue and, thus, uphold the Order of the learned CIT(A). 26. As regards disallowance of discount on sales the case of the assessee is that confirmatory letters were never called for and, hence, they were not furnished as otherwise complete details are available with the assessee. However, it is noticed that the Assessing Officer issued a show-cause notice calling upon assessee to furnish the basis of discount and details of sales made to each party and to establish the genuineness of discount. Except furnishing self-generated vouchers the assessee has not furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the fact that initial onus is upon the assessee to prove identity, genuineness and capacity of the loan creditors and the assessee having failed to prove genuineness and creditworthiness, the Assessing Officer disallowed cash credits to the tune of Rs. 11,50,728 under section 68 of the Act and in the absence of any further material produced even during the penalty proceedings, he concluded that it was a fit case for levy of penalty. In the assessment order, it was mentioned that in the month of January, 2003, summons were issued to various loan creditors and nobody responded to the summons. Though non-attendance in response to summons was in the knowledge of the assessee, even in the penalty proceedings assessee did not choose to furnish either the correct address or ensured attendance of some of the creditors. At any rate, no information was furnished to prove the creditworthiness of the creditors. Under these circumstances, claim of the assessee that confirmatory letters is sufficient compliance to the requirements under section 68 of the Act is not in accordance with law. An explanation tendered by the assessee, in the penalty proceedings should be substantiated with docum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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