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TMI Blog2012 (4) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is bona fide and he should substantiate that explanation by some evidence with him - Held that: when the assessee is able to offer reasonable explanation based on some evidence, the AO cannot invoke Part B of the explanation unless he has given finding based on some contradictory evidence to disapprove that explanation offered by the assessee - There is no finding of the AO based on some contradictory evidence to disapprove that explanation offered by the assessee was false or the assessee was not able to substantiate the explanation furnished or fails to prove that such explanation is not bona fide and that all the facts relating to the same and material to the computation of his total income has not been disclosed by him - Decided in favor of the assessee - IT Appeal Nos. 2597 and 2784 (AHD.) of 2009 - - - Dated:- 31-1-2012 - MUKUL KUMAR SHRAWAT, A.L. GEHLOT, JJ. Sunil Talati for the Appellant. Alok Johri for the Respondent. ORDER A.L. Gehlot, Accountant Member These are cross appeals against the order of Ld. CIT (A)-VIII, Ahmedabad in appeal No. CIT (A)-VIII/AC-4/100/08-09 dated 25-6-2009 for the assessment year 2004-05. 2. The ground raised in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not deductible u/s. 43B of the Act and according to the provisions of section 2(24)(x) r.w.s. 36(i) (va) are attracted so far as the contribution from the employees' is concerned. Similarly the assessee has disclosed Rs. 2 crore additional loss and claiming deduction u/s. 43B. The assessee could not substantiate the proof of bona fide claim u/s.43B as no payment was credited to Government account as required by the law. The CIT (A) deleted the penalty in respect of loss of Rs. 33,55,15,227/- on the ground of bonafideness of the assessee, however, the CIT (A) confirmed the penalty u/s. 271(1)(c) of Rs. 2 crore as the assessee disclosed this amount of loss only in response to notice u/s. 148 and the assessee has failed to discharge the onus cast upon it within the meaning of Explanation-1 to section 271(1) (c) of the Act. 4. The Ld. DR after narrating facts of the issue submitted that the provisions of the Act are very clear, referring to section 2(24)(x) r.w.s. 36 (i)(va) of the Act that employees' contribution to PF is to be added in the total income of the assessee. The Ld. DR submitted that the fact of the addition was by detection of concealment by the department and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o do with this ambiguous position of law. The ld. DR relied upon following decisions in support of his contention, Jt. CIT v. ITC Ltd. [2008] 112 ITD 57 (Kol.)(SB), CIT v. Pamwi Tissues Ltd. [2009] 313 ITR 137 (Bom.), CIT v. Godavari (Mannar) Sahakari Sakar Karkhana Ltd. [2008] 298 ITR 149 (Bom.), Asstt. CIT v. Viraj Forgings Ltd. [2008] 20 SOT 129 (Mum.) and The Assam Tribune v. CIT [2006] 285 ITR 452 (Gau.). 5. The Ld. AR on the other hand submitted that whether section 43B is applicable for employees' contribution or not is a controversial issue and there are decisions of ITAT as well as other High Courts favour and against on the issue. The Ld. AR submitted that the filing of return u/s. 148 reducing the loss on account of employees' contribution was a bona fide claim and in case of bonafideness of the claim penalty u/s. 271(1)(c) is not leviable. The Ld. AR relied upon various decisions as per assessee's paper book Sr. Nos. 11 to 16 of the paper book which are as under:- (1) CIT v. Desh Rakshak Aushadhalaya Ltd. [2009] 178 Taxman 453 (Uttarakhand) (2) CIT v. Vinay Cement Ltd. [2007] 213 CTR 268 (SC) (3) CIT v. Sabri Enterprises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for concealment or for giving inaccurate particulars while filing the return. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability. It is obvious that the penal provisions would operate when there is concealment of particulars of income or a failure of duty to disclose fully and truly particulars of income, imposed under the Act and the Rules thereunder. The duty is enjoined upon a person to make a correct and complete disclosure of his income and it is only when he fails in his duty by not disclosing his income or part thereof, he conceals the particulars of his income. The duty is enjoined upon him to make a complete disclosure of his income as well as a correct disclosure. Therefore, if the disclosure made-of the particulars of income is incorrect, then also he commits breach of his duty. Such defaults entail the penal consequences contemplated by section 271(1)(c)(iii) of the Act. 6.2 There cannot be a straight jacket 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income have been disclosed by him, then, the amount added or disallowed in computing the total 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. 6.4 A conspectus of the Explanation 1 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 rebuttable 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 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. 6.7 In case penalty under section 271(1)(c) generally revenue has relied upon the judgment of the Apex Court in the case of Union of India v. Dharamendra Textile Processor [2008] 306 ITR 277/174 Taxman 571. The fallout of the decision in Dharamendra Textile Processors ( supra ) questioning the correctness of the decision in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519/161 Taxman 218 (SC) has caused great uncertainty as to the penalty law for direct taxes. The decision in Dharamendra Textile Processors' case ( supra ) has been explained by the Supreme Court itself in Union of India v. Rajasthan Spg. Wvg. Mills [2009] 180 Taxman 609, wherein the Supreme Court understood Dharamendra Textile Processors' case ( supra ) to be not applicable, where section 11 AC of the Central Excise Act is not applicable, especially since that was not even the stand of the Revenue in this case. The Supreme Court had further explained the decision in CIT v. Atul Mohan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner (Appeals), Tribunal and the High Court was upheld by the Supreme Court. From above discussions we find that the cases relied upon by the learned DR does not help to the revenue. Those cases have been decided after considering facts of the respective case which are not similar to the facts of the case under consideration. 6.8 In the light of above discussions of the scheme and provisions of the Act regarding levy of penalty under section 271(1)(c) of the Act on consideration of the facts of the case under consideration we find that the issue whether penalty under section 271(1)(c) is leviable on accepting assessee's return of income in response notice under section 148 of the Act in which the assessee disclosed amount of employees' contribution considering sections 2(24), 36(i)(va) and 43B of the Act. Whether employees' contribution is allowable deduction or not is controversial issue. The contention of the revenue in this regard is that the provisions of the Act are clear is not correct as ld DR himself filed certain cases which itself is evident that issue was controversial issue and on the issue there are two views, one view which is in favour of revenue as per the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee further support by the fact that the revenue itself has gone through two process of assessment firstly processing return of income filed by the assessee and second time even at the time of scrutiny assessment under section 143(3) of the Act. When the issue did not come to the attention of Assessing Officer in two assessment proceedings how revenue can claim that relevant provisions were very clear on the issue and assessee has violated clear provisions of the Act. Thus under the circumstances of the case bona fide of the assessee cannot be doubted, rather it is established that the assessee was under the bona fide belief that his claim of employees' contribution is allowable claim under section 43B of the Act. It is different thing whether the assessee challenged the issue on merit before appellate authority or not may be on the ground that the assessee engaged in public utility services and incurred huge losses therefore there was no tax affect or any other reasons. It is settled law that assessment proceeding and penalty preceding both are separate proceedings. We find that the case of the assessee does not falls in the main provisions of section 271(1)(c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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