9911796707
TMI Blog2011 (5) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... . Agrawal, Accountant Member. This is an appeal filed by the revenue raising following grounds : 1. The ld. CIT(A) XX, Ahmedabad has erred in law and on facts in cancelling the penalty of Rs. 3,19,400 levied under section 271(1)(c) of the Income-tax Act by the Assessing Officer without properly appreciating the facts of the case and the material brought on record by the Assessing Officer. 1.2 In doing so, the ld. CIT(A) has erred in law and on facts in not appreciating that the assessee could not substantiate its explanation regarding the various entries appearing in its books of account leading to upholding of the addition on account of unexplained cash credits by the ld. CIT(A) and therefore the said penalty under section 271(1)(c) read with Explanation 1 was rightly levied by the Assessing Officer. 1.3 The ld. CIT(A) has erred in law and on facts in cancelling the said penalty on the ground that the issue is disputable and debatable without appreciating that the claim of cash credits introduced in the accounts of the assessee was found to be false as even the identity of those creditors could not be established. 1.4 In doing so, the ld. CIT(A) has erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... address of the depositor. 33. Raj Fibre Glass Ltd. Rs. 50,000 : The assessee not given and confirmation letter or address of the depositor. 34. M/s. Gautam Metal Works Rs. 5,00,000 : The assessee submitted that Shri Dharmendrabhai K. Shah, Prop. of M/s. Gautam Metal Corp. expired on 27-4-2002. Copy of acknowledgment of return of income for assessment year 1997-98 is filed. Bank account not produced. From the submission filed by the assessee it is noticed that Shri Dharmendrabhai K. Shah is a son of Shri Kantibhai Shah who is popularly known as Shri Kantibhai Vasanvala and in fact Shri Kantibhai Vasanvala is under huge debt and he has no creditworthiness. It implies that a man who takes huge loan from the people can never give loan to others. In original assessment stage also the assessee did not produce this person. 3. As stated above for depositors of Sl. Nos. 29 to 34 the assessee failed to discharge its onus to prove the genuineness, creditworthiness and existence of the depositors. Thus, in view of these facts, addition to the extent of Rs. 7,30,000 is made to the total income of the assessee being a non-genuine cash credit under section 68 of the Income-tax Act. Since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the creditors Dolar M. Shah, Sonal K. Shah, Diptiben V. Jaykumar and Raj Fibre Glass Ltd., from whom the assessee has shown to have borrowed Rs. 25,000, Rs. 50,000, Rs. 50,000 and Rs. 50,000 respectively, assessee has not given any confirmation letter or addresses of the depositors. In our considered view these are the material evidence for the purpose of making assessment as it would have enabled the Assessing Officer to carry out the enquiries. Mere certain claims made by the assessee but necessary particulars for verification of such claim have not been filed before the Assessing Officer then the only inference which can be drawn would be that either claim is false or assessee is not completely submitting the details thus preventing the Assessing Officer from carrying out the enquiries unless assessee is able to satisfy that he is prevented by sufficient cause from furnishing the details required by the Assessing Officer and such a case is found genuine by the revenue authorities. Otherwise non-furnishing of the details preventing the Assessing Officer to carry out its verification would be the case covered within the meaning of Explanation 1 to section 271(1)(c) which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of the depositor is not furnished then there is a lack of disclosure of such particulars and the addition made in the case of the assessee would attract Explanation 1(B) to section 271(1)(c). In the case of M/s. Gautam Metal Works from whom assessee has shown to have borrowed Rs. 5,00,000 assessee failed to produce the particulars of the bank and also did not reply to the allegation of the Assessing Officer that this creditor has no creditworthiness as it is already under lot of debts. Here also material facts are missing when assessee failed to produce the bank account in connection with the allegation that the creditor is already a popper. Thus in our considered view case of the assessee attracts Explanation 1(B) to section 271(1)(c). 9. In order to find out which of the clauses of Explanation 4 would be applicable to the facts of the case, we consider Explanation 4 to section 271(1)(c) as stood in assessment year 1997-98 as under : "Explanation 4. For the purposes of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded", (a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich date the amendment would be applicable. Hon'ble Supreme Court referred to Explanation 4(a) as inserted with effect from 1-4-1976 and explanation thereto and also to the circular issued by the Government explaining the intent for insertion Explanation 4(a). The Hon'ble Supreme Court thereafter held as under : "A combined reading of the Committee's recommendations and the circular makes the position clear that Explanation 4(a) to section 271(1)(c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. Therefore, even during the period between April 1, 1976 and April 1, 2003, the position was that the penalty was leviable even in a case where addition of concealed income reduces the returned loss. When the word "income" is read to include losses as held in Harprasad's case it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the Legislature contemplated (page 388). The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right (page 392)." The above being the position, the inevitable conclusion is that Explanation 4 to section 271(1)(c) is clarificatory and not substantive. The view expressed to the contrary in Virtual's case [2007] 9 SCC 665 is not correct." 13. In view of the explicit decision of Hon'ble Supreme Court (Larger Bench) the amendment by the Finance Act, 2002 though stated to be effective from 1-4-2003 would be applicable to earlier assessment year also meaning thereby that it would be applicable to assessment year 1997-98 as well. Prior to the decision in Gold Coin Health Food (P.) Ltd. (supra), Hon'ble Supreme Court in Virtual Soft Systems Ltd. v. CIT [2007] 289 ITR 83/159 Taxman 155 had taken a contrary view which was over-ruled in Gold Coil Health Food (P.) Ltd. (supra). Earlier to the decision in Virtual Soft Systems Ltd. (supra), Hon'ble Delhi High Court in CIT v. Aditya Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty. On appeal : Held, (i) that Prithipal Singh's case [1990] 183 ITR 69 (Punj. Har.) was decided on the merits with regard to the existence of "concealment" as an issue of fact and the court found as a fact that there was no concealment in that case. It could not be generalised that as the assessed income was a loss figure the assessee could not have a motive for concealment. That decision did not and could not mean that there must be a tax payable before a penalty can be levied. It only meant that the penalty amount will be over and above "any tax payable". The event that triggered a liability of penalty was entirely different and distinct from the taxable event. It did not mean that tax being payable is a condition precedent for the penalty being levied. The assessment year involved in that case was 1970-71 and Explanation 4 to section 271(1)(c) did not even exist at that time. Therefore, the decision in Prithipal Singh could not be a precedent or authority with regard to the interpretation of Explanation 4. Therefore, the Tribunal was not justified in holding that the decisions in Prithipal Singh's case (183 ITR 69 and 249 ITR 670) would apply even after the insertion of E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation, tax on Rs. 150 would be the tax sought to be evaded for the purpose of calculating the penalty. 17. Clause (b) to Explanation 4 is applicable in a situation covered by Explanation 3 to section 271(1)(c). Thus where assessee fails without reasonable cause to furnish within the specified time return of income under section 153 entire taxable income is deemed to be the concealed income as the returned income is taken to be the zero. Hon'ble Delhi High Court in Aditya Chemicals Ltd.'s case (supra) held that such entire taxable income would be concealed income notwithstanding the return is filed after the stipulated date. 18. Clause (c) is a residual clause and covers those situations which do not fall under clause (a) and clause (b). 19. Thus for the purpose of calculating tax sought to be evaded by invoking Explanation 4 one has to first go to clause (a). If the case fits into clause (a) then calculation of tax sought to be evaded would be carried out in accordance with what is stated in clause (a) and one need not go to clause (b) or clause (c). Where clause (a) is not applicable but clause (b) is applicable because assessee has failed to furnish a return within the sti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,785 in respect of which there is a finding of concealment of income and furnishing of inaccurate particulars of income, would be the tax sought to be evaded by the assessee. The ld. AR has relied on the decision in his own case in assessment year 2001-02 in ITA No. 1038/Ahd/2010 pronounced on 31-12-2010 which in turn has relied the decision of the Tribunal B Bench in the case of Maxima Systems Ltd. (supra) assessment year 1995-96 pronounced on 11-6-2010. In that year assessee had declared NIL income in the return and net taxable income was determined at Rs. 3,34,314 even though an addition of Rs. 27,46,643 was made and which was reduced to Rs. 3,34,314 by setting off of unabsorbed depreciation of the past years at Rs. 24,12,329. On these facts the Tribunal has held that clause (c) to Explanation 4 would be applicable. There is no dispute with this proposition. The case of the assessee in the present assessment year would not fall in clause (c) as returned income is a loss. There is a distinction between NIL income and loss returned. Case of loss return would fall in clause (a) and case of NIL income returned would fall in clause (c). The precedence cited by ld. AR cannot be appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
