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TMI Blog1987 (2) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... epartmental representative in reply urged that although ground No. 3 was not too happily worded the language of ground No. 1 was wide enough to cover all the issues. This was as under :--- " The learned CIT(A) erred in law and facts in cancelling the penalty levied under section 271(1)(c) of the IT Act, thereby granting reduction of Rs. 14,400. " 3. According to us ground No. 3 is in fact a jumbled array of words without any meaning whatsoever. We do wish that the revenue takes a little more care in spelling out the exact nature of its claim rather than asking the Tribunal to do it for them. We are however inclined to accept that ground No. 1 is wide enough to cover all the issues leading to the imposition of the penalty and its deletion by the CIT(A). 4. We now come to the facts of the case. The assessee in this case is an Advocate of the Gujarat High Court. He filed his return on 21-8-1974 showing the following income : Rs. (1) Salary as M.L.A. 5,175.00 (2) Property income 475.00 (3) Professional income 18,600.00 ----------------------------- 24,250.00 Less : L.I.P. 834.00 ----------------------------- Total Income 23,416.00 ----------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts had been paid to the assessee to the debit of the personal account of the Ex-Ruler. The nature of the enquiries, the conclusions reached by the ITO and the reasons weighing with the ITO in making the addition are recorded in detail in the two assessment orders and we do not propose to reproduce them here. 6. The Income-tax Officer being of the opinion that the assessee concealed the particulars of his income issued a show cause notice under section 271(1)(c) of the Act. The initial reply of the assessee was that he had not concealed any particulars of income and that an appeal had been preferred against the order of the ITO. His second and final reply dated 7-2-83 was on the following lines : " The Commissioner (Appeals)-I, has by his order dated 30-9-81 deleted the addition of Rs. 5,000 and has allowed a relief of Rs. 13,000 and has also from the expenditure of Rs. 26,500 claimed against the Maharaja's matters. Since the balance addition, which remains is only disallowance of expenditure claimed the provisions of section 271(1)(c) are not attracted at all and cause of action does not survive. The proposed action may therefore be dropped. " The Income-tax Officer reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it should have been taken into account by the Income-tax Officer and not only the receipts side. As stated by him the expenditure side should have also been considered by him. The Income-tax Officer himself has accepted that Rs. 13,000 were reimbursement of expenditure by Maharaja. This indicates that it is a reimbursement of the expenditure incurred by the appellant on behalf of the Maharaja. While deleting Rs. 13,0000 the CIT (Appeals) as stated by him he did not consider the other items of expenditure claimed by the assessee. It appears that for the purpose of settling the matters regarding ex-maharaja's land, the appellant was required to make frequent tours between Bombay and Bhavnagar. This naturally involved air-travel, taxi-travel, hotel charges and conference charges. The appellant also has paid Rs. 3,000 to his junior Y.V. Shah working with him at Tribunal level. He has paid Rs. 1,000 to local Advocate at Bhavnagar and Rs. 500 as clerical charges. The Income-tax Officer did not believe in this expenditure. He has not given deduction regarding this expenditure from professional receipts of the appellant, for want of proof probably the appellant might not have given adequa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l expenditure sought to be claimed by the assessee was very high as compared to the receipts and this itself proved that some of the items were bogus. (9) That the assessee came within the "Explanation" to section 271(1)(c) as the returned income was less than 80% of the assessed income. That the onus was squarely on the assessee to prove that he was not guilty of the charge of "concealment". 9. The learned Departmental Representative referred to various authorities in the course of his arguments. We do not propose to discuss them in detail but only reproduce the citations. These are : Addl. CIT v. Mangalsen Mohanlal [1982] 136 ITR 905 (All.), CIT v. Bankim Chandra Dutt [1979] 118 ITR 456 (Cal.), A.K. Bashu Sahib v. CIT [1977] 108 ITR 736 (Mad.), CIT v. S.P. Bhatt [1974] 97 ITR 440 (Guj.), Bombay Hardware Syndicate v. CIT [1973] 92 ITR 160 (Mad.), Seshasayee Bros. Ltd. v. CIT [1961] 42 ITR 568 (Mad.), CIT v. Ballarpur Industries Ltd. [1979] 119 ITR 817 (Bom.), CIT v. Indian Copper Corpn. Ltd. [1986] 28 Taxman 163 (Pat.), CIT v. Anantharam Veerasingaiah Co. [1975] 99 ITR 544 (AP), Loknath Chowdhury v. CIT [1985] 155 ITR 291 (Cal.), Addl. CIT v. Chandravilas Hotel [1986] 29 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reimbursed hotel bills to the assessee. That this showed that the assessee had in fact laid a claim to be reimbursed the aforesaid expenditure. (10) That even the payment of Rs. 4,500 to the Junior was noted in the Diary on the payment side. (11) That the legal propositions cited by the learned Departmental Representative were well accepted and laid down principles of law and about which there could be no dispute. The learned Advocate General referred to his paper book consisting of 61 pages during the course of the hearing. 12. The learned Departmental Representative in his reply stated: (1) That the CIT(A) had not given any relief on account of expenditure but had reduced the gross receipts from the Ex-Ruler by treating a sum of Rs. 13,000 as reimbursement of expenditure. (2) The Diary as a whole had been considered viz., the receipt side as well as the payment side. (3) That the parties concerned had deposed on oath wherever possible and that opportunity for cross-examination had been given in all cases to the assessee. (We at this stage pointed out to both the parties that it was a little late in the day to raise these objections. We also indicated to both sides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained as under : --- Rs. (1) Cash fees as noted in Diary (Refer annexure-B) 12,600 (2) Fees deposited in Bank (Refer annexure-A Summary of Bank credits) 7,650 (3) Surplus of receipts over expenditure on account of the Maharaja of Bhavnagar 11,550 ------------------ 31,800 ------------------ The figure of Rs. 11,550 was calculated as follows : Rs. Amount received 38,000 Less : Expenses Rs. Hotel bills 22,050 Junior fees 4,500 26,550 ---------------- -------------------- 11,450 16. The observations of the ITO in this respect are as follows :--- " The assessee has worked out surplus of receipts over expenditure at Rs. 11,550 on account of Maharaja of Bhavnagar. It requires to be mentioned here that the assessee did not furnish any details of gross professional receipts of Rs. 31,800 at the time of filing the return of income. Therefore, the assessee was asked to give break up of this gross receipts during the course of proceedings. During the course of assessment statement on oath the assessee has stated that he had shown Rs. 5,000 as fees received from exruler of Bhavnagar which are included in the gross receipts. Thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record three sheets from the letter pad of the Taj Mahal Hotel. First of all the assessee never reflected this expenditure in the original return. Secondly, he has not been able to prove the nature or the purpose of incurring the expenditure. Thirdly, he has not able to prove the expenditure by proper bills. Even the Ex-Ruler in his statement has mentioned that he has not reimbursed the amount of such bills to the assessee. The ITO while dealing with this issue observes : " The Ex-Ruler in his statement has stated that he has not reimbursed this amount of the Hotel Bills. The assessee was asked to clarify during the course of previous hearing under section 144B as to how these Hotel Bills could be claimed as deduction from his professional receipts. He gave slipshod explanation namely that an amount of Rs. 22,050 relates to expenditure on travelling Hotel Bill and sundry expenses. This claim of expenses are not proved. The assessee has not given any details of so called expenses except what he pointed that the Three Taj Mahal Hotel letter pad. It may be seen from that the assessee gave entirely false statement in the reply claiming deduction of fees as expenses. In the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as to the nature of the expenditure reimbursed. It is also a fact that the Ex-ruler in his deposition and written reply clearly stated that he has not reimbursed the 'hotel bills' pertaining to the Taj Mahal Hotel. We accordingly hold that the assessee's explanation to the effect that the reimbursement of Rs. 13,000 was against the expenditure of Rs. 26,550 was not correct. We further hold that it is not a case of "unproved expenditure" but a case of "bogus expenditure". 24. Another issue which we would like to refer to is the fact that the order of the CIT(A) in the quantum appeal was not challenged by either side. We do not know the considerations that might have weighed with the department in accepting the order but we can only say that the assessee had much more at stake specially when a charge of "concealment" had been laid at his doorstep. 25. We further hold that the "Explanation" to section 271(1)(c) squarely applies in this case. The expenditure claimed was not bon fide but bogus. The effect of the Explanation was that where the total income returned by any person was less than 80% of the total income assessed, the onus was on such person to prove that the f ..... 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