ARJUN SINGH,KOTA vs. ACIT, CIRCLE-I

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, ‘’A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 106/JP/2021 fu/kZkj.k o"kZ@Assessment Year : 2009-10 cuke Shri Arjun Singh The ACIT Behind Kohli Medical Vs. Circle-1 Keshavpura, Kota 324 005 Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFRPS 7075 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Written Submission jktLo dh vksj ls@ Revenue by: Shri Sanjay Dhariwal, CIT lquokbZ dh rkjh[k@ Date of Hearing : 15/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 14/12/2022 vkns'k@ ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 30-07-2021, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2009-10 wherein the assessee is aggrieved that the order of the ld. CIT(A) is bad in law and not justified in levying penalty us/ 271(1)(c) for Rs.7,74,020/-.

2 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA 2.1 Brief facts of the case are that assessment in the case was completed us 143(3)/250/147 on 03.01 2016 at an income of Rs.1,30,91.130/- against income of Rs.1,08,13,944/- assessed u/s 143/250 of the 1.T.Act, 1901 During course of assessment proceedings, the AO noticed that though the assessee is stated to be engaged in business activity of contractor ship of JCB machines and dumpers for civil construction work, but actually as per the profit & loss account the assessee engaged in the job work of blasting and transportations of stones to its various clients. Further, the assesse had not shown any income by way of hire charges of dumpers while he incurred major expenditure on blasting, drilling and on vehicle hire charges. All these show that the assessee was not involved in the business of running of vehicles on hire. Despite this, the assessee claimed 30% depreciation instead of depreciation @ 15% available to the assessee on dumpers Tata 207 and Truck. Thus, the assessee claimed higher rate of depreciation. Similarly, the assessee claimed higher rate of depreciation on Excavator, Drilling machine and Water tank @ 30% instead of 15% depreciation allowable. Since, the assessee did not engage in the business of running of vehicles on hire, the assessee furnished inaccurate particulars of its income by claiming excessive depreciation aggregating Rs. 22,77,188/ on the above assets. Therefore, the AO initiated penalty proceedings u/s 271(1)(c) on 03.02.2016. Subsequently, a show cause memo was issued to the assessee on 28.07.2016. The assessee has neither complied with the

3 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA penalty notice u/s 274 r.ws. 271(1) (c) issued on 03.02.2016 nor to the penalty memo issued on 28.07 2016. Hence, according to the AO, the assessee understated its income by claiming excessive depreciation on dumpers, tata 207, truck, excavator, drilling machine & water Tank. Therefore, The AO was satisfied that the assessee furnished inaccurate particulars of his income in the return to the extent of Rs.22,77,188/- and it is a fit case for levy of penalty u/s 271(1)(c) of the IT Act, 1961 and accordingly, penalty of Rs.7,74,020 was levied by the AO on the assessee. 2.2 Aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who confirmed the action of the AO as to the penalty u/s 271(1)(c) of the Act amounting to Rs.7,74,020/- by observing as under:- ‘’3.1 Ground No 1:- Through this grounds of appeal the appellant has challenged the levy of penalty u/s 271(1)(c) of the IT Act, 1961 at Rs: 7,74,020/- for furnishing of inaccurate particulars of income. During the course of assessment proceedings, the AO noticed that though the assessee is stated to be engaged in business activity of contractor ship of JCB machines and dumpers for civil construction work, but actually as per the profit & Loss account the assessee engaged in the job work of blasting and transportations of stones to its various clients. Further, the assessee has not shown any income by way of hire charges of dumpers, while he incurred major expenditure on blasting, drilling and on vehicle hire charges. All these show that the assessee was not involved in the business of running of vehicles on hire. Despite this, the assessee claimed depreciation @ 30% instead of @ 15% available on dumpers, Tata 207 and Truck. Thus the assessee claimed higher rate of depreciation. Similarly, the assessee claimed higher rate of depreciation on Excavator, Drilling machine and water tank @ 30% instead of 15% depreciation allowable. Since, he assessee did not engage in the business of running of vehicles on hire, the assessee furnished d inaccurate particulars of its income by claiming excessive depreciation aggregating to Rs. 22,77,188/- on the above assets. Had the case has not been scrutinized u/s 143(3)

4 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA and the same has not been pointed out by the AO during the course of assessment proceedings an amount of Rs. 22,77.188/- would have been escaped from taxation. 3.1.1. The position of law regard to levy of penalty u/s 271(1)c) has undergone a substantial change after the insertion of Explanation (1) to section 271(1)(c) w.e.f. 01.04.1976. Explanation (1) to section 271(1)(c) raises a presumption that as and when any amount is added or disallowed in computing the total income the same shall be deemed or represent the income in respect of which particulars have been concealed, Further w.e.f. 10.09.1986 amendment has been made in Explanation 1- B to section 271(1)(c). After this amendment further onus has been placed on the assessee to prove that the explanation furnished by him was bonafide. The position now is that unless and until the assessee substantiates the explanation and proves that such an explanation was bonafide the addition made to his income shall deemed to represent the concealed income. On the analysis of the provisions of section 271(1)(c) it is observed that the Explanation 1 to section 271(1) provides for the situation where no explanation for the failure is offered by the assessee or where the explanation that has been offered found to be false or where the assessee is not able to substantiate the explanation offered by him. In all these cases, the amount added or disallowed in computing the total income of such person shall be deemed to represent the income in respect of which particulars have been concealed. As per the Proviso to this explanation, the onus to establish that the explanation was bonafide and facts relating to the same and material to the of his income have been disclosed by him will be on the person charged for concealment. 3.1.2. As per the provision of explanation (1)(B), now the entire onus is on the assessee to not only offer an explanation but also to substantiate it and prove that the presumption was bona fide. At the same time the presumption so raised by the explanation (1) is rebuttable. The effect is that unless and until the assessee rebuts the presumption, he would be liable for penalty under section 271 (1) (c) of the Act. It is now an established law that the presumption would not stand rebutted merely by furnishing any general or fantastic or fanciful or unreasonable explanation by assessee. The explanation should be based on cogent and relevant material and should be accepted to the authorities. In this connection reference may be made to the Delhi High Court's decision in the case of CIT Vs. Gurbachan Lal reported in 250 ITR 157 (Delhi) 3.1.3. The apex court has approved the interpretation placed upon the Explanation by a full bench of the Punjab and Haryana High Court in Viswakarma Industries Vs. CIT (1982) 135 ITR 652. Similar view has been expressed by the Kerala High

5 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA Court in the case of CIT Vs. K.P. Madhusudan reported in 246 ITR 218. This decision has been affirmed by the Supreme Court in 251 ITR 99. Affirming the aforesaid decision, the Hon'ble Supreme Court has further held that after insertion of explanation its earlier decision in the case of Sir Shadi Lal Sugar and General Mills Ltd. Vs. CIT reported in 168 ITR 705 (SC) was no longer applicable. The Kerala High Court at page 244 has observed as under:- "The question of onus is of primary and added importance in legal acrimony, In CIT Vs. Anwar Ali (1970) 76 ITR 696, the apex court laid down that, before a person could be visited with a penalty for concealment, etc., the Revenue must prove that the amount in question was the income of the assessee and the he had concealed it with a motive. It was further held that penalty could not be imposed merely because any explanation given by the assessee in regard to the items in question was not believed to the true. The position of law on or after April 1, 1976, it that where in respect of any item of credit. (a) The assessee fails to offer a explanation or (b) the assessee offers an explanation which the taxing officer considers to the false, or (c) the assessee offers an explanation but no material or evidence to substantiate it, he shall be deemed to have concealed such income within the meaning of section271(1)(c). What section 68, 69, 69A, 698 and 69C deem for the purpose of assessment was injected for the purpose of penalty by operation of a deeming proviso A proviso was added to the new Explanation. Il concerns cases where the assessee offers an explanation which he is not able: to substantiate. Consequentially the provisions are intended to save such amount from imposition of penalty although the same had been added to the assessee's income in the assessment If the assessee's explanation is found to bona- fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him.’’ 3.1.4. The views similar to the above decision of Delhi and Kerala High Courts were expressed by the Allahabad High Court in the case of Sushil Kumar Sharad Kumar 232 ITR. 588 (Alld.). Similarly, the Delhi High Court in the case of CIT VS Sohan Singh 254 ITR 170 has held that for the purpose of penalty, matter has to be examined in the background of Explanation to section 271(1)(c). It has also been held that evidence recorded during the course of assessment proceedings, through not conclusive, are not totally irrelevant. They could be taken note of. According to the High Court what was required was that the assessee must offer an explanation which, if found to be untenable or unacceptable, then the penalty can be levied under section 271(1)(c) of the IT. Act.

6 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA 3.1.5. It is an obligatory duty cast upon a person filing the return of income to disclose all his income derived from any source under various heads and indicate the income under each head, which is chargeable to income-tax, after making the permissible deductions Disclosure of income would be disclosure of particulars of income, which a person is duty bound to disclose in fulfillment of his statutory obligations to pay tax on the income chargeable to tax. After the return is filed under section 139(1), the assessment of tax is to be made and for the purpose of making an assessment under the Act, the ITO makes an enquiry contemplated by section 142, under which notice is issued on the person who has made the return to produce accounts, documents or furnish verified information in writing including statement of all assets, etc. However, where the AO is satisfied that the return is correct and complete, as were the wordings of section 143(1) at the relevant time, he has to assess the total income without requiring the presence of the assessee or production by him of any evidence that the return is correct and complete, he is required to issue notice enabling the assessee to produce evidence on which he may rely in support of the return. The total income in such cases of regular assessment is, assessed after hearing the evidence adduced and considering all material gathered by the AO as provided in section 143(3). It, therefore, follows that in the assessment proceedings under section 143, the AO can find out whether the return of income is correct and complete. If he holds that the return of income is not correct or that it is not complete in. respect of the particulars of income which are required to be stated in the return, he will reach the correct figure of total income and determine the sum payable by the assessee or refundable on the basis of such assessment. If the income chargeable to tax has escaped assessment for any assessment year, by reason of omission or failure of the assessee to disclose fully and truly all material facts necessary for his assessment, reassessment proceeding can be initiated as provided under section 147. This again shows that full and true disclosure of income is primary obligation of the assessee. 3.1.6. If a person obliged to furnish the particulars of his income omits to furnish them, he thereby conceals the particulars. The concealment may take various forms. A glaring illustration of concealment would be where the assessee does not disclose or fully disclose in the return the income derived by him which would fall under a particular head, e.G. Income from other sources, while disclosing his income falling under other heads of income prescribed by section 14. To the extent, he does not disclose that income, he conceals the particulars of income. The obligation is not only to disclose particulars of income but to disclose them correctly and completely. If while disclosing the particulars of income in the return he puts them under a wrong head, he can be said to be furnishing inaccurate particulars of income. The particulars of income can be made inaccurate in a

7 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA variety of ways, a glaring illustration of which would be where the assessee while stating the income under a particular head, works out the income chargeable to tax after making deductions which are falsely made. Such a process would make the particulars of income inaccurate. In all such cases, whether the income is not disclosed against the constituent item of the return in which it falls or is partly not disclosed, or the particulars of income given in the return are incorrectly stated by any machination, the impact is bound to be on the figure of gross total income to be mentioned under various heads of income and also on the total income chargeable to tax. In fact, reducing the figure of income that would be chargeable to tax would be for the purpose of concealment of particulars of income or giving inaccurate particulars of income. The expression particulars of income would have relevance to all the particulars of income which the assessee is required to give in his return fully and truly, including the particulars of income chargeable to tax under various heads and the total income. Therefore, any concealment or inaccuracy in the particulars of income in the return occurring at any stage up to and inclusive of the ultimate stage of working out of total income, would attract the penalty provision of section 271(1)(c) of the Act. Every figure in the return which is set opposite to the item of income is a particular of income, whether the figure is one which is stated independently of anything else that appears in the return or the documents accompanying it or whether it is something derived from other figures elsewhere stated in such return or documents. False result may be produced by the falsity of one or more of the constituent items in the return. The words inaccurate particulars would cover falsity in the final figure as also the constituent elements or items. They simply would mean inaccurate in some specific or definite respect whether in the constituent or subordinate items of income or the end result. In the case of MAK Data (P) Ltd. v. CIT-II (2013) 38 taxmann.com 448 (SC) it was held that. "Voluntary disclosure does not release assessee from mischief of penal proceedings under section 271(1)(c) in terms of section 271(1)(c). Assessing Officer has to satisfy whether penalty proceedings be initiated or not during course of assessment proceedings and Assessing Officer is not required to record his satisfaction in a particular manner or reduce it into writing" 3.1.7 In view of the above facts and circumstances, it is evident that the appellant had deliberately and intentionally not disclosed the true and correct income and had furnished the inaccurate particulars of income with the intention to evade tax. Hence the AO has rightly imposed the penalty u/s 271(1)(c) of the Act and the imposition of penalty is upheld and grounds of appeal is Dismissed.’’

8 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA

During the course of hearing, the Bench noted that the assessee has filed the 2.3 written submission praying therein as under, to drop penalty proceedings u/s 271(1)© of the Act.

‘’The assessee was engaged in the business of construction activity, to execute above work they have to do some other works such as blasting and drilling to obtain grit and rocks and also taken some machinery or vehicle on rent to complete main construction work timely. Assessee has also separate contract for hiring of machinery or vehicles given on rent when they are idle to recover above cost. Assessee had shown vehicle and machine hiring charges under other receipts head in P&L a/c. So we would like to say that assessee mainly engaged in construction or civil work, blasting or drilling exp and hiring exp of vehicle is part of above main construction work. Assesee gives machinery or vehicle on hire when they are idle or not in use to recover some cost. They run above machinery or vehicle on hourly rates, having separate rental agreement other than above main contract. SO if vehicle run on hire is eligible for higher rate of depreciation. So we would like to say that assessee eligible for depreciation at 30% rate. So we would like to say that penalty u/s 271(1)© for Rs.7,74,020/- on account of higher depreciation for Rs.22,77,188/- claimed. Assessee claimed correct depreciation @ 30% so that penalty u/s 271(1)© not be levied as they are certain case laws, rulings and supreme court judgement say that mere higher or wrong claim of depreciation not lead to penalty u/s 271(1)©. Claim of higher depreciation not be treated as concealment of income or furnish inaccurate particulars of income.’’

9 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA The assessee through his written submission has filed the following case laws. 1. DVIT vs Exensys Software Solution Ltd (ITA No. 322/HYD/2014 2. Make My Trip (India) Pvt Ltd. vs DCIT, Circle 6(1), New Delhi (ITA No. 6514/Del/2014) 3. Chambal Fertilizers & Chemicals vs ACIT (Raj)

2.4 On the other hand, the ld. DR relied upon the orders of the lower authorities. 2.5 We have heard both the parties and perused the materials available on record including the written submission of the assessee. In this case, the AO levied the penalty of Rs.7,74,020/- by observing that the assessee understated its income by claiming excessive depreciation on dumpers, tata 207, truck, excavator, drilling machine & water Tank and the AO was satisfied that the assessee furnished inaccurate particulars of his income in the return to the extent of Rs.22,77,188/- and it is a fit case for levy of penalty u/s 271(1)(c) of the IT Act, 1961 and accordingly, penalty of Rs.7,74,020 was levied by the AO on the assessee which has been confirmed by the ld. CIT(A) holding that the assessee had deliberately and intentionally not disclosed the true and correct income and had furnished inaccurate particulars of income with the intention to evade tax. Thus the ld. CIT(A) sustained the penalty u/s 271(1)(c) of the Act. The Bench has gone through the entire case of the assessee but found that the assessee could neither substantiate its case nor controvert the findings of the lower authorities. In this situation, we

10 ITA NO. 106/JP/2021 SHRI ARJUN SINGH VS ACIT, CIRCLE1, KOTA have no other alternative except to concur with the findings of the ld. CIT(A). Thus the appeal of the assessee is dismissed. 3.0 In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 14/12/2022.

Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 14 /12/2022 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Arjun Singh,, Kota 2. izR;FkhZ@ The Respondent- The ACIT, Circle -1, Kota 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 106/JP/2021) vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेजज. त्महपेजतंत