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TMI Blog2010 (5) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation to substantiate their claim addition could be sustained but this aspect of human probability tendency of non-co-operation by the parties after business transaction is over, is required to be considered while deciding bona fide aspect of the assessee in penalty matter u/s 271(1)( c ). The case of the assessee falls under the essence of Part B of the Explanation . The assessee offered reasonable explanation. The AO has not given finding based on some contradictory evidence to disapprove that explanation offered by the assessee which the assessee is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. Penalty u/s 271(1)( c ) cannot be levied unless the case is strictly covered by the provisions of section 271(1)( c ). There is no finding that that the assessee has concealed particulars of income or furnished inaccurate particulars of income, discussed above. Under the circumstances, it cannot be held that the AO has found that the assessee has concealed particulars of income or furnished inaccurate particulars of income. We fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such cases, penalty under section 271(1)(c) is not leviable. He relied upon following decisions :-- 1.Atharva Builders (P.) Ltd. v. Asstt. CIT [IT Appeal No. 5900/01 (Mum.) of 2005] 2.CIT v. Aarkay Saree Museum [1991] 187 ITR 147 (Bom.) 3.Rajan H. Shinde v. Dy. CIT [2006] 103 ITD 360 (Pune) (TM) 4.ITO v. Purnima Devi Gupta [2004] 3 SOT 753 (Jodh.) 5.Jt. CIT v. VXL (India) Ltd. [2005] 94 TTJ (Asr.) 513 6.H.P. State Forest Corpn. Ltd. v. Dy. CIT [2005] 93 ITD 442 (Chd.) 7.Mansukh Dass Soni v. Asstt. CIT [2006] 10 SOT 51 (Jodh.) (URO) (SMC) 8.Shiv Lal Tak v. CIT [2001] 251 ITR 373 (Raj.) 9.CIT v. Metal Products of India [1984] 150 ITR 714 (Punj. & Har.) 10.Harigopal Singh v. CIT [2002] 258 ITR 85 (Punj. & Har.) 11.Asstt. CIT v. Allied Construction [2008] 26 SOT 50 (Delhi) 12.Sahyog Sahakari Shram Samvida Samiti Ltd. v. Asstt. CIT [2007] 111 TTJ (Luck.) 340. 7. The learned DR, on the other hand, relied upon the orders of the revenue authorities and submitted that the assessee made purchases through hawala entries. The assessee has failed to discharge its onus to support its claim of purchases. The learned DR further submitted that the assessee has filed affidavit before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies 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 attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. Here we would like refer some observations of the Apex Court from the judgment of Reliance Petroproducts (P.) Ltd.'s case (supra) reads as under : (Page 166) "13. In this behalf the observations of this Court made in Sree Krishna Etectricats v. State of Tamil Nadu & Anr. [2009] 23 VST 249 (SG) as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed : So far as the question of penalty is concerned, the items which were not included in the turnover were found incorporated in the appellant's account books. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate authorities found that the assessee must have made the purchases but the same may not be from Mr. F. H. Rizwi. Actual purchases made by the assessee were not doubted by the appellate authorities while deciding the quantum matter. However, considering the circumstances, they confirmed the addition to the extent of 25 per cent of relevant purchase on the basis of the facts, figures and particulars provided by the assessee. Thus, the main basis on which the Assessing Officer levied penalty was not sustained by the appellate authorities. 12. In addition to main provisions of concealment, "has concealed the particulars of his income" or "has furnished inaccurate particulars of such income" there are deemed to represent the income in respect of which particulars have been concealed. The deemed concealment is provided in explanations. Often a question arises whether in cases where additions or disallowances made by the ITO, the penal provisions of section 271(1)(c) would attract. Explanation 1 takes care of this situation. The Explanation to section 271(1) of the Act reads as under : "Explanation 1.--Where in respect of any facts material to the computation of the total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. The burden is on the assessee. If he fails to discharge that burden, the presumption that he had concealed the income or furnished inaccurate particulars thereof is available to be drawn. The issue relating to "bona fide" and "false" returns in imposing penalty on the assessee under section 43 of the Madhya Pradesh General Sales Tax Act, 1958, and section 9(2) of the Central Sales Tax Act, 1956 have been examined by the Apex Court in the case of Cement Marketing Co. of India Ltd. v. Asstt. Commissioner of Sales Tax [1980] 124 ITR 151 . Facts in brief of this case were that the assessee-company effected certain transactions of sale of cement in accordance with the provisions of the Cement Control Order during the assessment period 1-8-1971 to 31-7-1972. The amount of freight included in the "free on rail destinations railway station" was paid by the purchasers and, hence, the assessee deducted from the price shown in the invoices sent to the purchasers. In the course of its assessment to sales tax under the Madhya Pradesh General Sales Tax Act, 1958 and the Central Sales Tax Act, 1956, the assessee did not include the said amount of freight in its taxable turnover on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is possible that even where the incorrectness of the return is claimed to be due to want of care on the part of the assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the Court may in a given case, infer deliberateness and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a "false" return inviting imposition of penalty. This view which is being taken by us is supported by the decision of this Court in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211, where it has been held that: ". . . Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. . . ." It is elementary that section 43 of the Madhya Pradesh General Sales Tax Act, 1958, providing for impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the assessee has no such power under the Act to bring the party personally to produce before the Assessing Officer. It appears from the record that revenue authorities did not exercise such power under section 131. If we consider the facts of the case under consideration from the point of view of a businessman for that purposes we would like to refer a general human probability/tendency in business circle. That when transactions with a particular party are over that party may not ready to co-operate in giving information which were exactly asked by the Assessing Officer to the assessee which were to collect from the party by the assessee. As stated above that under these circumstances, the revenue authorities have ample such powers under the Act and if they are not exercising such powers, the assessee cannot be blamed for concealing particulars and/or furnishing inaccurate particulars of income. Further, the business is managed through employees/staff in that circumstances, the assessee may more interested in cost then parties to whom it was purchased. In respect of quantum matter if the assessee failed to submit such material information to substantiate their claim additi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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