MAKCON,MUMBAI vs. ITO WD 2 PANVEL, THANE

This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-2, Thane, [in short CIT(A)] in appeal No. dated 23.12.2015. The assessment was framed by the Income Tax Officer, Ward-2, Panvel (in short ITO) for the assessment year 2008-09 order dated 21-12-2010 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalty was levied by ITO, ward-2, Panvel under section 271(1)(c) of the Act vide order dated 28-06-2011.

“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding action of the assessing officer in levying the penalty of ₹ 3,97,180/-."

“5: Due consideration was given to the explanation offered by the assessee. The provision of the 271(1) (c) and its explanation, has clearly laid out the situations for leviability of penalty and there is no ambiguity as such. The Explanations appended to sec. 271(1)(c) entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return.

(a) Explanation 1 makes it clear that the assessment proceedings and penalty proceedings are wholly distinct and independent of each other.

(b) Explanation 1 is a rule of evidence. It raises an initial presumption that the additions represent concealed income of the assessee. The initial burden of discharging the onus to rebut the above presumption is on the assessee. In other words, the assessee has to explain that the explanation offered by him about a particular income/expenditure is bonafide and all material to the computation of his income has been disclosed.

(c) The burden placed upon the assessee is not discharged by any vague explanation. Explanation of the assessee for the purpose of avoidance of penalty must be an acceptable explanation.

(d) Mere failure to substantiate the explanation is not enough to warrant penalty. Revenue has to establish that the explanation offered was not substantiated.

Reliance is placed on the Apex Court's, observation in the case of Union of India Vs. Dharmendra Textile Processors (2008 - 306 ITR 277) wherein the larger bench of the Apex Court (after the decision in the case of Dilip N. Shroft -291 ITR 519) had disapproved the statement that willful concealment is essential for attracting concealment penalty. It is held that Object behind enactment of Penalty u/s 271(1)(c) r/w Explanations indicate that the said section has been enacted to provide for a remedy for loss of revenue. Penalty under that provision is a civil liability and willful concealment is not an essential ingredient for attracting civil liability.

6. In this case, since the assesses was unable to reconcile the difference in accounts of the assesses which amounts to Rs. 3,74,436/- with documentary evidence, the some was brought to tax by the AO. Similarly, in respect of two contract receipts totaling to Rs. 12,28,246/- which was not reflected in its sale7 by the assessee, it was contented by the assessee that the contract work of the said parties were not carried out due to some dispute and the payment was returned to some third parties at the instruction of the parties. However, the assessee could not prove his claim of repayment with bank extract nor this amount was shown as unpaid in its Balance Sheet. Moreover, it was observed by the AO that TDS was deducted by these parties on these two receipts. Since the argument of the assessee was not accepted by the AO nor the assesses put forth any concrete proof in support of his claim, the said receipts were added by the AO to the income of the assessee. I am

A.O.

Order pronounced in the open court on 28-02-2018.