M/S AJAY SALT & CHEMICALS,,UNA vs. I.T.O., WARD-1(3),, VERAVAL

आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

3.1 In view of the above the AO issued notice under section 274 r.w.s. 271(1)(c) of the Act. But the assessee again failed to submit or furnished any reply before the AO. Therefore the AO in absence of any reply or submission held that the assessee has furnished inaccurate particular of income and imposed penalty of Rs. 1,61,568/- being 100% of tax sought to be evaded.

u/s.271(1)(c) of the Act are initiated separately for furnishing inaccurate particulars of income.

Being aggrieved by the order of the ld. CIT-A, the assessee is in appeal before us.

2.2 Thus the penalty order does not specify the charge for which initiation is specific. It it settled law that initiation has to be specific. The above line shows that both the charges viz. furnishing of inaccurate particulars and also of concealment is there. The judicial pronouncements requires specific conclusion of charge initiated.

3.1 Para no 8 page no 2 of the penalty order also mention as under: In view of the above facts, it is held that the assessee has furnished inaccurate particular of income for which the assessee is liable for penalty U/s. 271(l)(c) of the Act. Therefore, it is clearly established that the assessee has concealed the particulars of income. The act of the assessee is noting but willful attempt on his part to conceal the income with a view to evade the tax. By doing so the assessee has squarely rendered himself liable for penal action U/s. 271 (l)(c) of the IT Act. 3.2 Thus the concluding para also does not specify a specific charge and it mention both the charges. The Hon. Gujarat High Court has specifically required to arrive at a charge specifically. 3.3 In view of the above it is humbly submitted that Provisions under which penalty imposable should be clearly stated Where there is no clear cut finding recorded by the assessing officer on the point whether he intends to levy penalty for assessee 's concealing the particulars of income or for his furnishing inaccurate particulars of such income, the order of penalty is liable to be struck down. It is for the assessing officer to clearly say as to under which provision he is going to impose penalty. -Vide CIT v. Manu Engineering Works ( 1980) 122 ITR 306 (Guj) and CIT v. Lakhdir Lalji (1972) 85 ITR 77 (Guj). See also Navinbhai M. Patel v. ITO (1988) 27 ITD 411 (Ahd-Trib). 4 In view of the above legal position the penalty levied being not sustainable in the eye of law may kindly be cancelled.

5 As regards merits of the case it may be submitted as under :

5.1.1 The admitted position by the Ld. A.O. as per para 5 of the assessment order is that that the assessee has shown unsecured loan of Rs. 9,70,0007- out of which Rs. 4,90,0007- pertains to 26 persons is old loan pertaining to earlier years. When the Ld. A.O. has accepted identical position for earlier years, the loan received during this years ought to have been accepted as genuine transaction.

5.1.2 Thus the Ld. A.O. also does not consider the business necessity and regularity although he accept that even in earlier year such transactions are there and accepted. 5.2 The Ld. A.O. made no efforts to call or examined any of the persons since he has not considered to call any persons by issuance of summons. More ever he made the addition in lump sump for all the persons. He ought to have justified his action by specifying details for each of persons. More ever he also should have considered the capacity of each of the persons_before making addition. 5.3 In view of this and as described in the statement of facts filed with Your Honour, the action of the Ld. A.O. even without specifically mentioning how the person concern has no capacity to give loan of such' small amount of less then Rs. 20,0007- and if there is no capacity of such small amount then what is the capacity of each of the persons for lesser amount. Not only this even the Ld. A.O. over look the position of similar transaction in earlier years which is also a conclusive part of genuine transaction in the line of business of the assessee. 5.4 In view of the above it is humbly submitted that penalty levied on addition made of Rs. 4,80,000/- may kindly be deleted if necessary by asking the Ld. A.O. to call all the persons by issuing summons and to examine them or by conducting inquiring through inspector in remand proceedings. The assessee also rely on the following judicial pronouncement with provides guidelines that when there is lack of proper inquiry by A.O., he should carry out the necessary inquiry or issue summons without that the addition is not sustainable.

8. It is therefore submitted that penalty levied may kindly cancelled.

7.1 Now the controversy before us arises so as to adjudicate whether the assessee has furnished inaccurate particulars of income with respect to the cash credit which were treated as unexplained under section 68 of the Act. The term inaccurate particular of income has not been defined under the provisions of section 271(1)(c) or elsewhere in the Act the Act. However, the meaning of the term inaccurate has been discussed by the Hon’ble Supreme Court in the case of Reliance Petroproducts (P) Ltd reported in 189 taxman 322 wherein it was held that the term ‘inaccurate’ signifies deliberate act or omission on the part of the assessee. As such, the details/informations contained in the return of income /financial statements /audit report which are not correct according to truth, and were furnished by the assessee with the dishonest intent shall be treated as inaccurate particulars. In holding so, we find support and guidance from the judgement of Hon’ble Supreme Court in the case of Reliance Petroproducts (P) Ltd (supra). We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :— "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript." We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false 7.2 Now, if we analyses the facts of the present case in the light of the above stated discussion, we find that the assessee has failed to furnish the basic details of the parties such as identity, creditworthiness of the parties and genuineness of the transactions despite the necessary opportunities were provided to it. As such, it is the 2nd round of appeal before us. On the earlier occasion the ITAT in ITA number 322/Rjt/2012 vide order dated 30-08-2012 has restored this issue to the file of the AO for fresh adjudication with the direction to the assessee to furnish the necessary details about the parties from whom it has taken loan. The relevant extract of the order is reproduced as under: The assessee should produce the loan creditors before the AO as required by the AO. The assessee should also produce the documentary evidence regarding repayment of the loan in the subsequent period. The assessee will also produce the evidence about identity and the creditworthiness of the loan creditors as well as the genuineness of transactions and therefore, the AO will pass as order as per law after providing reasonable opportunity of being heard to the assessee.

7.3 But the assessee failed to furnish the necessary details. Thus it is transpired that the assessee with the mala-fide intent has furnished the inaccurate particulars of cash credit in the guise of loan from the parties.

7.4 We are also conscious to the fact that the addition in the present case has been made under the provisions of section 68 of the Act, representing the sum credited in the books of accounts but the assessee offers no explanation about in nature and source thereof as discussed above. Accordingly such sum credited in the books of accounts was deemed as income of the assessee. But such addition during the assessment proceedings being deemed income does not automatically attract the penalty provisions as envisaged under the provisions of section 271(1)(c) of the Act. As such, the onus, in the case of deemed income as specified under section 68 of the Act, lies on the Revenue to prove that such deemed income is the real income of the assessee in order to attract the penalty provisions specified under section 271(1)(c) of the Act. In holding so we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Baroda Tin works Box reported in 221 ITR 661 wherein it was held as under: Sections 68, 69, 69A, 69B and 69C are all part of the same scheme where certain amounts though not proved to be the income of the assessee of the previous year concerned are for the purpose of charging to tax are deemed to be so by creating legal fiction absolving the department from its initial duty to prove that any such is the income of the assessee. But for these provisions, it was for the revenue to prove that any sum, not disclosed by the assessee but which is sought to be taxed as income of the assessee, is the income of the assessee for the previous year relevant to the assessment year.

7.5 However, we note that the principles laid down by the Hon’ble Gujarat High Court in the case as discussed above do not apply to the present facts of the case. It is because the assessee failed to explain or furnish the basic details of the parties from whom it has taken loan during the year. Thus in the absence of explanation/ documentary evidence and the assistance from the side of the assessee, the Revenue cannot be held guilty in not discharging its onus in the present facts and circumstances.

7.6 It is well-settled law that an obligation gets discharged due to impossibility of performance. The law of impossibility of performance does not necessarily require absolute impossibility, but also encompass the concept of severe impracticability. In our humble opinion, the doctrine of impossibility of performance applies in this case. Due to uncontrollable circumstances, the performance of the obligation to verify the loan creditors was not possible by the Revenue as no details were furnished by the assessee. Thus the impossibility of performance releases the Revenue from its obligation to verify such liability in the present facts and circumstances. A default occurs only when an obligation is not performed. We also find support from the legal maxim “lex non cogit ad impossibilia” meaning thereby that the law does not compel a man to do what he cannot possibly perform. In holding so we find support & guidance from the judgment of Hon’ble Supreme Court in the case of Krishna Swamy S. PD. & ANR Vs. Union of India & ors reported in 281 ITR 305 wherein it was held that :

“The other relevant maxim is, lex non cogit ad impossibilia—the law does not compel a man to do what he cannot possibly perform. The law itself and its administration is understood to disclaim as it does in its general aphorisms, all intention of compelling impossibilities, and the administration of law must adopt that general exception in the consideration of particular cases. [See : U.P.S.R.T.C. vs. Imtiaz Hussain 2006 (1) SCC 380, Shaikh Salim Haji Abdul Khayumsab vs. Kumar & Ors. 2006 (1) SCC 46, Mohammod Gazi vs. State of M.P. & Ors. 2000 (4) SCC 342 and Gursharan Singh vs. New Delhi Municipal Committee 1996 (2) SCC 459].”

Thus in view of above we hold that the Revenue would be discharged from such an obligation and hence cannot be hold a defaulter.

7.7 In view of the above, we find that the assessee has not furnished the basic details about the parties therefore we hold that the assessee has furnished inaccurate particulars of income. In holding so, we also draw the support and guidance from the judgment of Hon’ble Allahabad High Court in the case of CIT Vs. Agrawal Refigration reported in 35 taxmann.com 436 wherein it was held as under: “In our considered opinion in the absence of any plausible explanation given by the assessee for not incorporating the payment of Rs.37,000/- made by bank draft in the regular books of account, necessary inference is that he has concealed particulars of his income. The amount having been added under Section 69A of the Act nonetheless is to be treated as income of the assessee and the burden was upon the assessee to prove that there was no concealment of income. The Tribunal was, therefore, not justified in deleting the penalty only on the ground that the addition was made under Section 69A of the Act which is a deeming provision.”

7.8 Regarding the contention of the learned AR for the assessee that there was no specific charge levied by the AO whether the assessee has concealed the particulars of income or furnished inaccurate particular of income, in this regard we note that the AO has mentioned the specific charge in the penalty order by stating that the assessee has furnished inaccurate particulars of income. Accordingly we hold that, the assessee cannot get the benefit of immunity from the penalty merely there was no specific charge in the penalty notice issued under section 274 of the Act or in the assessment order. We, in this regard, draw support and guidance from the judgement of the Hon'ble Jurisdictional High Court in the case of Snita Transport Pvt. Ltd. Vs. Assistant Commissioner of Income Tax reported in 42 taxmann.com 54 wherein it was held that penalty cannot be imposed without mentioning the specific charge. The relevant extract of the order is reproduced below: 9. Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penalty was imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of "and/or" may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that "I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income." It was in this respect the Bench observed that "Now the language of "and/or" may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down."

7.9 Thus the penalty in the present case was correctly levied by the AO which was subsequently confirmed by the learned. Hence, we do not find any reason to interfere in the finding of the learned CIT (A). Accordingly, the ground of appeal raised by the assessee is dismissed.

Order pronounced in the Court on 23/01/2020 at Ahmedabad.