Penalty is leviable within meaning of Explanation 1(B) to section 271(1)(c) in respect of alleged gifts received by minor sons of assessee which are finally found transferred to assessee’s books
ITAT AHMEDABAD BENCH “D”,
Saurabh Bansal Vs. ITO,
APPEAL NO: ITA No. 351/Ahd/2008,
DECIDED ON June 25, 2010
Per D. C. Agrawal, Accountant Member.
This is an appeal filed by the assessee against the order of ld. CIT(A) in which he has confirmed the penalty of Rs.2,08,380/- under section 271(1)(c) of the Act. The assessee raised following ground :-
1. On the facts and in circumstances of the case as well as law on the subject, the ld. CIT(A) has erred in confirming the action of the AO in levying penalty of Rs.2,08,380/- u/s 271(1)(c) of the I.T. Act.
2. The facts of the case are that assessee has declared in the return an income of Rs.1,88,020/-. In the course of assessment proceedings following additions were made :-
a Rs.3,75,984/- on account of bogus purchases
b Rs.2,45,000/- on account of unexplained cash credit.
c Rs.40,154/- on account of brokerage expenses.
In respect of bogus purchases of Rs.3,75,984 the assessee claimed that these purchases are made from M/s Chandrakala Prints for Rs.1,92,036/- and from M/s Neminath Silk Mills for Rs. 1,83,948/-. Payments were claimed to have been made through account payee cheques. The AO enquired by issuing letters under section 133(6) to the said parties but these parties failed to respond. Even though the assessee furnished copies of account of these parties in his books but no bill or vouchers were filed as evidence. The AO carried out further enquiries from the bank and traced the cheques issued by the assessee to the bank account of Shree Sai Tex and Mann Traders. On examination of these accounts it showed that cash had been withdrawn immediately after cheques were deposited. The AO required the assessee to furnish explanation but no explanation was furnished by the assessee. Accordingly the AO treated these purchases from M/s Chandrakala Prints and M/s Neminath Silk Mills as bogus and amounts paid by crossed cheques was received back by the assessee and accordingly the addition was made in the total income.
3. In respect of unsecured loan the AO noticed that assessee has raised loans of Rs.1,35,000/- and Rs.1,10,000/- from his two minor sons. The AO noticed that cash was deposited in their bank accounts before the cheques were issued in favour of assessee. The assessee claimed that such deposits represented gifts received by his sons. The AO required the assessee to explain the source of such gifts and creditworthiness of the donors but no explanation was furnished and donors were also not produced for verification. He accordingly treated the loan amount of 3 Rs.2,45,000/- as bogus and added the same in the total income of the assessee under section 68.
4. Regarding brokerage expenses the AO required the assessee to prove the expenses as incurred wholly and exclusive for the purposes of business and further that such expenses were not claimed in earlier years. The AO required the assessee to produce confirmatory letters from the recipients and produce the persons who have received the payments. But the assessee failed to furnish any evidence. The AO accordingly treated the expenses as bogus and added the same in the total income of assessee. The matter traveled to the Tribunal in quantum addition. The Tribunal vide its order in ITA No.718/Ahd/2006 pronounced on 28.10.2009 deleted the first addition and confirmed the other two as under :-
(i) Addition in respect of bogus purchases
(at pages 4-5 of the Tribunal’s order)
“7. We have considered the rival submissions and the materials placed on record. After considering the facts of the case, it is seen that assessee is engaged in the business of purchase and sale of cloth on commission basis only. This fact is evident on perusal of purchase and sale bills which are also enclosed in the paper book. After making purchases on various dates from above two parties i.e. M/s Neminath Silk Mills and M/s Chandrakala Prints assessee has immediately resold the goods to various parties on commission basis. On perusal of purchase and sale bills, it is seen that there is no difference in the quantity and quality of goods and contention of ld. AR is found to be correct. As such if the purchases are not genuine we agree with the contention of ld. AR that it would not have been possible to make corresponding sale. Besides this, it is also seen that assessing officer has also failed to bring any evidence on record which indicates that assessee has not made purchases from above two parties. Hence, we are of the considered opinion that ld. CIT(A) is not justified in confirming the addition made by AO and accordingly that addition made by the AO is hereby deleted.”
(ii) Addition in respect of bogus gifts
(at pages 6-7 of the Tribunal’s order)
“90. We have heard the rival submissions and the materials placed on record. After carefully going through the observations of the AO and the arguments of ld. AR, it is seen that all the donors who made gifts to assessee’s minor sons are found to be parties of no means by the ld. AO. It is also seen that AO has made inquiry by deputing the ward inspector and it was found that the donors were not residing at the addresses given by the assessee. It is also apparent on the perusal of the return of income filed by various donors that they have filed their returns showing meager income which is just above the amount not chargeable to tax. It is also seen that assessee has failed to produce the donors before AO and thus we do not find any reason to interfere with the findings of CIT(A) and accordingly the addition is confirmed. The ground No.2 of assessee’s appeal is dismissed.”
(ii) In respect of bogus expenses
(at pages 8-9 of the Tribunal’s order)
“7. We have heard the rival submissions and the materials placed on record. After considering the entire facts of the case, we are of the opinion that ld. CIT(A) has rightly confirmed the action of AO in making addition as assessee has failed to prove the nature of service rendered by the broker. Further, the payments have been made in cash and are supported by self made vouchers. Thus, the genuineness of expenditure is not fully verifiable and therefore, addition is confirmed. The ground no.3 is therefore dismissed.”
5. In penalty proceedings the AO sent a show cause notice on 13.2.2007. Assessee was required to show cause why penalty under section 271(1)(c) should not be levied in this case. In response to the same the assessee did not attend nor file any written submission or request for adjournment. The AO accordingly proceeded to levy the penalty. The ld. CIT(A) confirmed the penalty in respect of all the three additions. 5
6. Before us, ld. AR for the assessee submitted that no penalty should be levied in respect of first addition as the same is deleted by the Tribunal.
7. The ld. DR on the other hand submitted that penalty should be levied because assessee failed to furnish any explanation in response to show cause notice and case of assessee is covered under Explanation -1 to section 271(1)(c). He submitted that in spite of specific request the assessee failed to produce the alleged donors or to show that his minor sons had actually received gifts. The explanation was baseless, it was not substantiated and all the material facts relating to assessment have not been disclosed.
8. We have considered the rival submissions and perused the material on record. In our considered view penalty cannot be levied in respect of first addition being bogus purchases of Rs.3,45,984/- as the addition is deleted by the Tribunal.
8.1 It has been held by Hon. Allahabad High Court in Addl. Commissioner of Income-tax v. Badri Kashi Prasad (1993] 200 ITR 0206 (All)- that the levy of penalty was based on the addition to income made by the Income-tax Officer. The addition was deleted by the Tribunal. Hence, the Tribunal was justified in canceling the penalty. 8.2 Similar view is taken in Prabhat Oil Traders v. Income-tax Officer (No. 3) (1996) 218 ITR (A.T.) 0039 ITAT, Ahmedabad where head notes indicated following propositions :-
“Penalty-Concealment of income-Amount allegedly invested in purchase of commodity and profit on its sale outside the books of account— Addition made to income on the ground that the amount represented unexplained investment and also suppressed profits on sale outside books of account-No evidence that explanation regarding purchase was false- Addition deleted in quantum proceedings-Penalty could not be levied- Income-tax Act, 1961, s. 271(1)(c).”
8.3 In City Dry Fish Company v. Commissioner of Income-tax (1999) 238 ITR 0063 (A.P.) it has been held, (i) that the points had been decided straightaway instead of directing the case for reference and then ordering the reference, which will take another decade; and (ii) that, in the instant case the order of the Tribunal was to the effect that the sum of Rs.85,622/- pertained to the year previous to the assessment year 1980-81 and was available as reserve and, as such the order of the Income-tax Officer clubbing that amount of Rs.85,622/- as the income for the assessment year 1980-81 stood set aside. As a necessary corollary, the levy of penalty on the above component also had to be set aside.
8.4 In CIT vs. Mohd. Bux Sokat Ali (2004) 265 ITR 326 (Raj) it has been held that where addition to the income is deleted by the Tribunal then penalty in respect of that amount of addition cannot be sustained.
8.5 Similar view was taken by the Tribunal, Mumbai, in ACIT vs. VIP Industries (2009) 122 TTJ 289 (Mum) wherein it has been held that where the addition was deleted by the Tribunal in quantum appeal, the very foundation for levy of the penalty ceased to exist.
8.6 Accordingly penalty levied in respect of addition of Rs.3,45,984/- is deleted.
9. However, in respect of other two additions, the position is different. These additions are confirmed by the Tribunal as above. The assessee failed to give any explanation in response to show cause notice before levy of penalty. Therefore, the case of the assessee is covered under Explanation-1 to section 271(1)(c). For the sake of convenience we reproduce Explanation -1 to section 271(1)(c) as under :-
“Sec. 271(1) –If the Assessing Officer or the Commissioner (Appeals) [or the Commissioner] in the course of any proceedings under this Act, is satisfied that any person –
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or
He may direct that such person shall pay by way of penalty –
Explanation -1 –Where in respect of any facts material to the computation of the total income of any person under this Act,-
(A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner(Appeals) or the Commissioner to be false or
(B) such person offers an explanation which he 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], 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.”
Thus penalty under explanation-1 (A) can be levied by holding the addition as a case of deemed concealment of income or the case where assessee has furnished inaccurate particulars of income in respect of addition sustained if assessee fails to furnish an explanation before the AO in response to show cause notice, issued by him before levy of penalty. The case of the assessee is also covered in terms of Explanation -1(B) if we treat that explanation furnished by the assessee during the course of assessment proceedings as the explanation assessee could have furnished in response to show cause notice before levy of penalty. The explanation was that assessee’s minor sons have received gifts in cash which was deposited in the bank account and money was then transferred to the assessee as loan from minor sons. This explanation is not substantiated inasmuch as necessary evidence in respect of the claim has not been filed. The identity of the donors and their creditworthiness were not explained before the AO. If assessee would have discharged the primary onus then there would not have been any case for holding that assessee has not substantiated his explanation. But in a case like this, where assessee chose to sit quietly and did not furnish any satisfactory explanation about cash deposited in minors account which is finally transferred to assessee’s account, then it could not said that assessee has discharged the primary onus lying on him. Similarly, we hold that assessee has failed to disclose all the material facts necessary for assessment when he chooses not to disclose the identity of donors their addresses and their creditworthiness and particularly when AO required the assessee to produce the donors and assessee fails to do so. Under the circumstances explanation furnished by the assessee during the course of assessment proceedings cannot be treated as bona fide. As all the three ingredients laid down in Explanation -1(B) are satisfied the addition made by the AO can be deemed as the income in respect of which assessee has concealed the particulars of income or furnished inaccurate particulars.
10. In respect of claim for bogus expenses ld. DR submitted that case is covered under Explanation -1(B) to section 271(1)(c) as assessee failed to prove that the payments were made for business purposes. Once the claim of expenses is not substantiated and all the material facts relating to 9 the claim are not disclosed to the AO inasmuch as neither the identity of persons to whom the payments were made nor the evidence of services having been rendered are furnished then it cannot be said that expenditure was actually incurred for the purposes of business. On the other hand, the ld. AR for the assessee has relied on the decisions of Hon. Gujarat High Court in National Textile vs. CIT (2001) 249 ITR 125 (Guj) and CIT vs. Jalaram Oil Mills (2002) 253 ITR 192 (Guj) for the proposition that where explanation offered by the assessee is not accepted by the Revenue in respect of additions proposed u/s 68, then it would not be sufficient for levy of penalty as it is for the revenue to adduce proof of concealment of income and that in absence of any material on record that explanation furnished by the assessee was false or that cash credits constituted income of the assessee explanation-1 to section 271(1)(c) would not be applicable and penalty under section 271(1)(c) cannot be imposed merely because additions are sustained.
11. The ld. DR in rejoinder had pointed out that these two judgments pertained to the period prior to 1.4.1976; the decision of Hon. Gujarat High Court in National Textile (supra) pertained to Asst. Year 1974-75 and the decision in Jalaram Oil Mills (supra) pertained to Asst. Year 1971-72 when Explanation-1 to section 271(1)(c) was different than what is applicable for Asst. Year 2002-03. He submitted that Taxation Laws Amendment Act, 1975 w.e.f. 1.4.1976 inserted new Explanation-1 which is altogether different in putting the onus and satisfaction of ingredients. Therefore, the decision of Hon. Gujarat High Court in these two cases would not be applicable for the assessment for Asst. Year 2002-03. 10
12. In order to examine the above contention we refer to Explanation – 1 to section 271(1)(c) which existed prior to Taxation Laws Amendment Act, 1975, which reads as under :-
“Explanation to sec. 271(1)(c) prior to 1.4.76 as applicable to A.Y. 1971-72 Explanation.–Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or willful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section.”
13. The decisions of Hon. Gujarat High Court in Jalaram Oil (supra) and National Textiles (supra) were based on the interpretation of above Explanation-1 existing prior to Taxation Laws (Amendment) Act, 1976. It was held that explanation raised rebuttable presumption and the burden which is cast on an assessee is akin to a civil burden which may be discharged on a preponderance of probabilities. The word used in section 68 suggests that where an addition is warranted then penalty under section 271(1)(c) would not follow as a natural corolarry. In National Textiles’ case it was held that in order to justify the levy of penalty under Explanation-1 to section 271(1)(c) two factors must co-exist, there must be some material or circumstances leading to the reasonable confirmation that amount does represent assessee’s income. It is not enough for the purpose of penalty that the amount has been assessed as income and secondly the circumstances must show that there was animus i.e. conscious concealment or act of furnishing inaccurate particulars on the 11 part of the assessee. Explanation-1 to section 271(1)(c) as above and as was existing at that time had no bearing at factor No.1 but had bearing on factor No.2. The explanation does not make the assessment conclusive evidence that the amount as addition was in fact income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. Unless circumstances leading to the reasonable and positive inference that assessee’s explanation are false, assessee must have held to have proved that there was no mens rea or guilty mind. Thus above two judgments interpreted the then existing explanation where it became necessary for the Revenue to prove that assessee had in fact a guilty mind. In other words the ratio laid down by Hon. Apex Court in CIT, West Bengal vs. Anwar Ali’s case (supra) is still held the field even where Explanation-1 was invoked. Even though the wording of Explanation-1 apparently showed that assessee had to prove that failure to return correct income did not arise from any fraud or gross or willful neglect on his part, but Hon’ble Courts interpreted particularly in the above two judgments, that the onus still remained on the Revenue to prove that there was an act of contumacious conduct or animus while not returning correct income.
14. By introducing Explanation -1( as existing prior to 1.4.1976) by Finance Act, 1964, the burden of proving that omission to disclose true income did not proceed from any fraud or gross or willful neglect was put on the assessee. It provided that where income returned by any person is less than 80% of the amount of the income assessed on regular assessment (including re-assessment u/s 147 of the Act) as adjusted by bona fide claim of an expenditure which has been disallowed in the assessment, the assessee has to prove that failure to return correct income 12 did not arise from any fraud or from any gross or willful neglect on his part. If it is not so proved then such difference (as adjusted by bona fide claim of expenditure disallowed) would be deemed concealment of income or deemed as income in respect of which assessee has furnished inaccurate particulars. However, it was experienced by Wanchoo Committee that appellate authorities were not inclined to uphold the penalties imposed on the basis of this explanation since they were of the view that department was still under obligation to prove the concealment. The adjusted difference between the assessed income and the returned income can be due to a variety of reasons, some technical like estimate of G.P. and other purely arithmetical and in view of the committee it would not be correct to initiate penalty proceedings in every case which the difference exceeded 20%. The provisions in the United Kingdom relating to levy of penalty on the basis of which Explanation-1 was framed has been dropped. Thus it was experienced that Explanation-1 as existing at that time has failed and did not serve any useful purpose. The committee felt that penalty should not be draconian but those who are tempted to resort to concealment of income should not be allowed to get away tenuous of legal interpretation. The committee accordingly made following recommendations which became the basis for inserting Explanation-1 to section 271(1)(c) by the Taxation Laws (Amendment) Act, 1976:
“(a) Presumption of concealment where explanation found false — Several officers of Department invited our attention to the Supreme Court’s decision in the case CIT, West Bengal vs. Anwar Ali (76 ITR 696). It has held by the Court that penalty for concealment of income cannot be imposed merely because the explanation given by an assessee is found to be false. While this decision was given in the context of clause (c) of the sub-section (1) of section 28 of Indian Income-tax Act, 1922, it is not reasonably certain that it would not apply to penalties under the 13 Income-tax Act, 1961. We would, therefore, recommend, as a measure of abundant caution, that an Explanation to sub-section (1) of section 271of the Income-tax Act, 1961, may be inserted to clarify that where a taxpayer’s explanation in respect of any receipt, deposit, outgoing or investment is found to be false, the amount represented by such receipt, etc., shall be deemed to be income in respect of which particulars have been concealed or inaccurate particulars have been furnished within the meaning of clause (c) of sub-section (1) of section 271 of the Income-tax Act, 1961.” This led to insertion of the following explanation-1 under section 271(1)(c):
“Explanation as introduced by Taxation Laws (Amendment) Act of 1976 Explanation 1.–Where in respect of any facts material to the computation of the total income of any person under this Act,–
(A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner to be false, or
(B) such person offers an explanation which he is not able to substantiate,
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:
Provided that nothing contained in this Explanation shall apply to a case referred to in clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him.”
15. The new Amendment by Taxation Laws (Amendment) Act, 1976 inserting Explanation-1 to section 271(1)(c) provided that where in 14 respect of facts material to the computation of the total income of the assessee he furnishes no explanation or he could not substantiate the explanation offered by him or the explanation offered by him is found to be false, the relevant addition to total income shall be deemed to be his concealed income. The proviso provided that if Explanation offered by the assessee is bona fide and the facts relating to the Explanation and material to the computation of total income has been disclosed by the assessee Explanation-1 will not be applicable. In other words, addition to total income would be the deemed concealed income in two situations covered by clause (A) and clause (B). Clause (A) provides that where an assessee fails to offer an explanation or where explanation offered in respect of amount added to the total income is found to be false and as per clause (B) where in respect of the addition to the total income assessee offers an explanation which he is not able to substantiate. As per proviso Clause (B) would not be applicable where explanation offered by the assessee is merely rejected if such explanation is bona fide and all the facts relating to the same and material to the computation of total income have been disclosed by him. Thus out of larger area where an explanation is not substantiated a large chunk of circumstances are taken out where explanation given is considered bona fide and all the material facts necessary for computation of income have been disclosed. The Explanation -1 in this form created difficulties inasmuch as it was found that it became difficult to invoke clause(B) of Explanation-1 to section 271(1)(c), in many cases where explanation was not substantiated because such explanation could be considered as bona fide and without bringing evidence on record to suggest, as to what material fact assessee did not disclose the addition could not be deemed as concealed income within the meaning of clause (B).To over come this difficulty Taxation Laws Amendment Act and Miscellaneous Provisions Act, 1986 amended 15 Explanation-1 to section 271(1)(c). It was felt that as per existing Explanation 1(B) after Taxation Laws Amendment Act, 1976 the fact that explanation offered was not substantiated will have to be established by the Income-tax Department and mere failure on the part of assessee to substantiate his explanation would not be enough to warrant penalty if such explanation is bona fide. The notes on clauses and memorandum explaining the amendment in clause (B) of this Explanation is as under :- “The Amending Act in clause (B) of this Explanation has substituted for the words “not able to substantiate”, the words “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”. Further, the proviso making the existing Explanation inapplicable to a case where in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person if the explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him, has been cast on the person who has committed the default.”
16. With these amendments, the new Explanation-1 which is existing as at present and is also applicable for Asst. Year 2002-03, came out to be what we have reproduced in para above.
16.1 Clause (A) of Explanation-1 remained the same as it was made by the Amendment Act, 1976 but clause (B) of Explanation-1 created three ingredients to be satisfied simultaneously and cumulatively for deeming the addition to the total income as concealed income. They are –
(1) the assessee offers an explanation which he is not able to substantiate; (2) he fails to prove that such explanation is bona fide; and 16 (3) that all the facts relating to the same and material to the computation of total income have been disclosed by him.
16.2 Explanation-1(B) has been interpreted by ITAT Lucknow Bench-B in Star International vs. ACIT (2008) 23 SOT 88 (Lucknow) wherein it is held that burden is on the Revenue to show that all the three ingredients to the Explanation-1 (B) are satisfied. It is held that the first ingredient of clause (B) is “such person offers an explanation which he is not able to substantiate” does not mean that explanation is not accepted by the concerned authorities but it means that there is no substance in the claim made by the assessee. The word `substantiate’ is opposed to words `vague or fanciful, or without any foundation or basis’.
16.3 The second ingredient is that assessee fails to prove that such explanation is bona fide which means that facts and circumstances exist and there is preponderance of probabilities that what assessee states could be true or could have been true. It is primarily supported by material on record, history of the case and books of accounts of the assessee. The claim of the assessee is apparently in accordance with principles of Accountancy or as per judicial pronouncement existing at the relevant time.
16.4 The third limb is “that all the facts relating to the same and material to the computation of his total income have been disclosed by him” would mean that all the materials which are relevant for computing the income of the assessee have been disclosed not only during the assessment proceedings but at the time of filing of return itself. 17
17. Thus from a careful study of above provisions amendment in explanation and judgments of Hon. Gujarat High Court in the two cases above clearly indicate that above two judgments were applicable only in a case where Explanation-1 to section 271(1)(c) as existing prior to Asst. Year 1975-76 was invoked. The new explanation is substantially amended the liability of onus and ingredients required to be satisfied are different and, therefore, different degree of proof is required for bringing the case within the mischief of new Explanation-1 or for getting out of it.
Hon. Gujarat High Court has also held that where there is an amendment in the Act then judgment given on the basis of earlier provision of law would not create a binding precedence. Following are the judgments :-
(i) Roshanlal S. Jain vs. DCIT (Asst) (2009) 309 ITR 0174 (Guj)
In income-tax matters which are governed by an all-India statute, when there is a decision of a High Court interpreting a statutory provision, it would be a wise judicial policy and practice not lo take a different view However, this is not an absolute proposition and there are certain wellknown exceptions to it In cases where a decision is sub silentio, per incuriam, obiter dicta or based on a concession or takes a view which it is impossible to arrive at or there is another view in the field or there is a subsequent amendment of the statute, or reversal or implied overruling of the decision by a High Court, or some such or similar infirmity is manifestly perceivable in the decision, a different view can be taken by the High Court.
(ii) Arvind Boards and Paper Products Ltd. vs. CIT (1982) 137 ITR 0635 (Guj)
It is settled law that if two interpretations of a taxing provision are possible, the interpretation which is favourable to the assessee should be accepted If one High Court has taken a possible view which is favorable to the assessee, even if another possible view favorable to the Revenue can be adopted such futile exercise is to be avoided for, ultimately, the view in favor of the assessee might have to be taken In the income-tax matters, which are governed by an All India statute, when 18 there is a decision of a High Court interpreting a statutory provision, it would be a wise judicial policy and practice not to take a different view, barring, of course, certain exceptions, like where the decision is sub silentio, per incuriam, obiter dicta or based on a concession or takes a view which it is impossible to arrive at or there is another view in the field or there is a subsequent amendment of the statute or reversal or implied overruling of the decision by a High Court or some such or similar infirmity is manifestly perceivable m the decision. If one High Court has interpreted the provision or section of a taxing statute, which is an All India statute and there is no other view in the field another High Court should ordinarily accept that view in the ……………….”
Therefore, in our humble view the above two judgments in National Textile vs. CIT (supra) and CIT vs. Jalaram Oil Mills (supra) would not be applicable in respect of addition made in the Asst. Year 2002-03.
18. Thus when we apply explanation-1as existing for the Asst. Year 2002-03 in respect of second addition being bogus gifts, we notice that a finding of fact has been given by the Tribunal that donors were not produced before the AO, and they were not found residing at the addresses given by the assessee. Thus the basic ingredients required for accepting a gift as genuine were not furnished and thus the explanation furnished by the assessee that money deposited in the account of minor sons came out of gifts is not substantiated and all the particulars in respect of the explanation were not furnished. Neither the correct addresses of the donors were given not they were produced before the AO. Even the worth of the donors was not established. From these facts it is apparent that not only the explanation was not substantiated, all the material facts relating to explanation were not furnished. The explanation of the assessee was also not bona fide inasmuch as it was not explained as to why he was unable to produce the donors or give their correct addresses. Unless the circumstances which created inability in the 19 assessee to disclose the material facts necessary for assessment or to substantiate the explanation furnished by him are elaborated and convincingly established, explanation of the assessee cannot be treated as bona fide. Thus penalty is leviable within the meaning of Explanation- 1(B) to section 271(1)(c) in respect of alleged gifts received by the minor sons of the assessee which finally found transferred to the assessee’s books.
19. However, in our considered view penalty would not be leviable in respect of addition of Rs.40,154/- being brokerage expenditure in respect of which it was held that genuineness of the expenditure is not established and that they are not fully verifiable, payments were made in cash and were supported by self-made vouchers and there was no evidence of services rendered. The claim is clearly unsustainable and, therefore, addition was confirmed by the Tribunal but for making unsustainable claim penalty cannot be levied as held by Hon. Supreme Court in CIT vs. Reliance Petro Products 322 ITR 158 (SC) as under :-
(i) S. 271(1)(c) applies where the assessee “has concealed the particulars of his income or furnished inaccurate particulars of such income”. The present was not a case of concealment of the income. As regards the furnishing of inaccurate particulars, no information given in the Return was found to be incorrect or inaccurate. The words “inaccurate particulars” mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c).
(ii) The argument of the revenue that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of 20 the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature.
(iii) The law laid down in Dilip Shroff 291 ITR 519 (SC) as to the meanings of the words “conceal” and “inaccurate” continues to be good law because what was overruled in Dharmendra Textile Processors 306 ITR 277 (SC) was only that part in Dilip Shroff where it was held that mens rea was an essential requirement for penalty u/s 271 (1)(c).