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TMI Blog2010 (5) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... ch expenses was not being made It is thus clear that all the material facts and particulars relating to the assessee's computation of income were never disclosed by the assessee, and it is further clear that the explanation offered by the assessee has not been substantiated and as well as it is not found to be plausible and bona fide one and it is against all human probabilities, especially when the conduct of the assessee shows that he has been inflating expenses and had been writing books well after the close of the year not only in the year under consideration but even in the preceding three assessment years also - Decided against the assessee - ITA No. 523/Ahd/2008 - - - Dated:- 31-5-2010 - T K SHARMA JUDICIAL MEMBER J. A. N. PAHUJA ACCOUNTANT MEMBER J. Assessee by : - Shri Sakar Sharma,AR Revenue by: - Smt . Neeta Shah, DR ORDER A N Pahuja: This appeal by the assessee is di rected against an order dated 24-12-2007 of the ld. CIT(Appeals) -VI I , Ahmedabad, upholding penalty of Rs.5,52,040/- levied u/s 271(1)(c) of the Income-tax Act,1961[hereinafter referred to as the Act ] 2. Facts, in brief, as per relevant orders are that return declaring inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bits these expenses in the books of account without any bills or vouchers for such expenses. He further mentioned that he was not verifying or preparing any vouchers or bills in respect of expenses relating to leave encashment and messing expenses since last eight years and he was debiting these expenses as per the instruction of Shri Shyourajsingh Chauhan the assessee. Regarding his fees also he mentioned that he had not received Rs.40,000/- which had been shown as debited in petty cash book on 22.12.2001. He had received only Rs.10,000/- as fee for preceding assessment year and had taken advance of Rs.25,000/- in the month of May, 2001 for the marriage of his sister. He also confirmed that the entry of Rs.40,000/- in the petty cash book was not true and was bogus entry. The statements of other employees revealed that they were not receiving bonus or ESI/PF benefit or overtime ,leave encashment or messing charges etc.. When confronted, the assessee explained that sometimes vouchers were not signed by the employees. In the light of facts found during the course of survey and on the basis of statements of various employees, ITP and the assessee, the AO concluded that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o proved while the assessee had declared additional income before the settlement Commission in the preceding assessment years, the AO rejected the book results for the year under consideration, having recourse to provisions of sec. 145(3) of the Act and estimated 10% of the receipts amounting to Rs. 32,48,902 as net business income for the year under consideration. Inter alia, penalty proceedings u/s 271(1)(c) were also initiated. On appeal, the findings of the AO were upheld by the ld. CIT(A). After receipt of order of the ld. CIT(A), in response to a showcase not ice issued by the AO on 15/03/2007 before levy of the penalty, the assessee submitted that (i) all the documents / papers required for making the assessment were available on record. (ii) the estimation of net profit @ 10% of the receipt is arbitrary and without considering the facts and details, without verifying the documentary records and papers submitted during the course of assessment proceedings. The assessee has neither concealed any particulars of income nor has furnished any inaccurate particulars of income. (iii ) in view of the above, penalty u/s 271(1) (c) of the Act was not leviable. 5 However the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts of the assessee were written after the close of the financial year i.e. previous year. Apparently, entire books of account of the assessee are unreliable and if income is worked out in such a situation, it would be clear that the assessee is liable to penalty for concealment. This is for the simple reason that the assessee manipulated the entire books of account by writing the books as per its whims and fancy after the close of the previous year. It would be relevant to note the facts which has been incorporated in the penalty order that for various expenses, cash amount was given and on an average basis expenses were debited in the books of account. In fact, the AO has recorded statement of various persons which shows that there was vide variation between the expenses debited in the books and expenses actually claimed. All this shows that the assessee had deliberately manipulated its books of account in such a fashion that there was no other way but to estimate the income of the assessee. However, this is not a case of pure and simple estimation but a case of estimation for the reason that the expenditure claimed was deliberately inflated and there were various wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. As is evident from the aforesaid cl. (c) of s. 271(1) of the Act, the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The legislature has not used the words 'concealed his income'. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate, then the assessee would be liable to penalty under s. 271(1)(c) of the Act. If the income had to be assessed under section 145 of the Act, then the presumption would be that the income was not properly returned, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, the particulars which were made the basis of addition in the assessment would not have come to the notice of the Assessing Officer. In fact, the material particulars were not disclosed .The expression ''conceal'' as defined in Dilip N Shroff case,291 ITR 519(SC) means to hide or keep secret. The word conceal is con plus celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The assessee having claimed inflated expenses in the books written well after the close year and that too year after year, leads to only one conclusion that the income was not properly returned and therefore levy of penalty has to be upheld, as concluded by Hon ble jurisdictional High Court in CIT vs. Chandra Vilas Hotel,291 ITR 202(Guj) in similar circumstances. Resorting to estimate in this case was not an estimate without basis but with a clear cut background of material, wherefrom it was noticed that the assessee was inflating expenses year after year. The explanation of the assessee could not be verified from its own records and apparently, the assessee failed to discharge the onus placed on it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in the case of K.P.Madhusudanan vs. CIT,251 ITR 99(SC) held that : We find it difficult to accept as correct the two judgments aforemeiitioned. The Explanation to section 271(1)(c) is a part of section 271. When the Income-tax Officer or the Appellate Assistant Commissioner issues to an assessee a notice under section 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By reason of the Explanation, where the total income returned by the assessee is less than 80 per cent. of the total income assessed under section 143 or 144 or 147, reduced to the extent therein provided, the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, unless he proves that the failure to return the correct income did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under section 271 put to notice that if he does not prove, in the circumstances stated in the Explanation,, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that a default in complying with the statute has occurred and it is wholly unnecessary to ascertain whether such a violation was intentional or not. 8.33 The breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman, SEBI v. Shriram Mutual Fund [2006] 131 Comp Cas 591 (SC) ; [2006] 5 SCC 361. This view has been reiterated by the Hon ble Supreme Court in their decision dated 29.9.2008 in the case of Union of India and others Vs. Dharmendra Textile Processors and others, in civil appeal nos.10289 10303 of 2003. 8.4 In the light of provisions of sec. 271(1)(c) of the Act read with explanation 1 thereto and the aforesaid judicial pronouncements, it is well established that whenever there is difference between the returned and assessed income, there is inference of concealment. The explanation 1 to sec. 271(1)(c) of the Act raises a presumption that can be rebutted by the assessee with reference to facts of the case. Thus, the onus is on the assessee to rebut the inference of concealmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income returned, represent the income in respect of which particulars have been concealed and ultimately levied penalty on finding that some of the expenses, referred to in the order, having been not properly explained equal to the amount of income, held to be such in respect of which particulars have been concealed. In the light of these facts, the Hon ble High Court cancelled the penalty since from the petty nature of expenses referred to in the order of Rs. 40, Rs. 80, Rs. 1,480, etc., the Tribunal was held to be not justified in holding that the explanation furnished by the assessee was not bonafide, the same being not based on any material particularly when the assessee agreed for applying of gross profit rate, precisely for the reason that he was not in position to vouch for each and every detail of the expenses entered in the books of account, to substantiate the result shown by him. Hon ble High Court observed that it was not permissible for the Assessing Officer to initiate penalty proceedings for one specific breach and directing enquiry to another set of circumstances, which were not the foundation for initiating penalty proceedings. But such are not the facts in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete " law " declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this court, to support their reasonings. In Madhav Rao Jivaji Rao Scindia Bahadur v. Union of India [1971] 3 SCR 9; AIR 1971 SC 530, this court cautioned (at page 578 of AIR 1971 SC). 8.52 In view of the aforesaid decision, the reliance by the ld. AR on various decisions referred to above is totally misplaced. 8.6 In the case of CIT v. Prathi Hardware Stores [1993] 203 ITR 641 (Ori.), Hon'ble Orissa High Court have laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd every explanation by the assessee must be accepted. ." 8.8 There is no substance in the contention that penalty under section 271(1)(c) of the Act cannot be imposed in all circumstances whenever the income is assessed on estimate rejecting the explanation of the assessee. Even on estimated additions, levy of penalty has been upheld.[CIT Vs. Warast Hussain,171 ITR 405(Patna), Commissioner Of Income-Tax, Tamil Nadu I, Madras. vs E. V. Rajan,151 ITR189(Mad), Commissioner Of Income-Tax.vs Hoshiarpur Express Transport Co. Limited.,162 ITR 393(Punjab Haryana), Commissioner Of Income-Tax.vs Fazilka Dabwali Transport Co. Pvt. Limited,178 ITR 656, (Punjab Haryana), Addl. CIT vs. Chndrakantha another,205 ITR 607(MP) ,AM Shah Co. vs. CIT,238 ITR 415(Guj),CIT Vs. Krishnaswamy Sons,219 ITR 157(Mad.),Addl. CIT Vs. Lakshmi Industries Cold Storage Co. Ltd.,146 ITR 492(All) and CIT Vs. Swarup Cold Storage general Mills,136 ITR 435(All.)]. 8.9 Even the feeble plea on behalf of the assessee that penalty has been initiated for concealment of income while has been levied for furnishing inaccurate particulars of thereof is not correct since both the AO and the ld. CIT(A) have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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