IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 2354/M/09 ASSESSMENT YEAR: 2003-04 SHRI KAMAL ROOPCHAND JAIN, APPELLANT C/O G.M. PUROHIT & CO., 213, TAPO COMM. CENTRE RAM MANDIR ROAD, GOREGAON (W), MUMBAI 400 102. (PAN ACVPJ2953Q) VS. INCOME TAX OFFICER, RESPONDENT WARD 25(2)(1), MUMBAI. APPELLANT BY : MR. VAIBHAV P. MORE RESPONDENT BY : MR. S.K. MADHUKAR O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)- XXV, MUMBAI, PASSED ON 20.01.2009 FOR T HE ASSESSMENT YEAR 2003-04. 2. THE GROUND RAISED IN THIS APPEAL IS IN RESPECT O F PENALTY OF RS. 51,466/- U/S 271(1)(C) OF THE ACT. 3. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM OF RS. 1,50,000/ - AGAINST HOUSE PROPERTY DUE TO WHICH THE SAME WAS DISALLOWED BY TH E AO AND CONFIRMED BY THE CIT(A). THEREAFTER, THE AO INITIAT ED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME RELATING TO HOUSE PROPERTY AN D PENALTY OF RS. 51,400/- LEVIED U/S 271(1)(C), WHICH WAS CONFIRMED BY THE CIT(A) RELYING UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS, 1 74 TAXMAN 571. ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 2 4. I HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE CLAIMED INTEREST O N HOUSING LOAN AMOUNTING TO RS. 1,50,000/-. THE PROPERTY ACQUIRED PRIOR TO 01.04.1999, THEREFORE, THE ASSESSEE WAS ENTITLED TO DEDUCTION ONLY RS. 30,000/-. THE CLAIM OF THE ASSESSEE WAS ALSO DISALL OWED ON THE GROUND THAT THE PROPERTY WAS NOT BEING UTILIZED AS AN SOP AS THE ASSESSEE RESIDED AT SOME OTHER PLACED. THE AO LEVIE D PENALTY ON THE GROUND THAT THE ASSESSEE HAS DELIBERATELY CLAIMED I NTEREST IN SPITE OF NOT COMPLYING THE CONDITIONS LAID DOWN IN THE ACT. WHAT IS INACCURATE PARTICULARS OF INCOME AND WHAT IS CONCEALMENT OF IN COME HAS BEEN DISCUSSED BY THE ITAT IN THE CASE OF MRS. NAJMA M. KANCHAWALA FOR AY 2001-02 IN ITA NO. 7371/M/05 VIDE ORDER DATED 11 .02.2009, WHERE I WAS ONE OF THE PARTY. THE RELEVANT FINDING S OF THE ITAT IN THE SAID CASE IS REPRODUCED BELOW:- 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE CRUX OF THE MATTER TO BE EXAMINED IS WHETHER PENALTY UNDER SECTION 271(1) READ WITH THE EXPLAN ATION-1 OF SECTION 271(1) IS APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. THE PROCEEDINGS UNDER SECTION 271(1) (C) CAN BE INITIAT ED ONLY IF THE A.O OR THE FIRST APPELLATE AUTHORITY IS SATISFIED IN TH E COURSE OF ANY PROCEEDINGS UNDER THE ACT. IF HE IS SATISFIED AS PE R CLAUSE (C) THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE SUM MENTIONED IN SU B-CLAUSE (III) OF CLAUSE (C). THE EXPRESSION USED IN CLAUSE (C) IS H AS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE, BOTH IN CASES OF CONCEALMENT AN D INACCURACY THE PHRASE PARTICULARS OF INCOME ARE USED. IT WILL BE NOTED THAT AS REGARDS CONCEALMENT, THE EXPRESSION IN CLAUSE (C) I S HAS CONCEALED THE PARTICULARS OF HIS INCOME AND NOT HAS CONCEAL ED HIS INCOME. THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOM E' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NO T BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT . ONE THING IS CERTAIN THAT THESE TWO CIRCUMSTANCES ARE NOT IDENTICAL IN D ETAIL ALTHOUGH THEY MAY LEAD TO THE SAME EFFECT, NAMELY, KEEPING OFF A CERTAIN PORTION OF INCOME. THE FORMER IS DIRECT AND THE LATTER MAY BE INDIRECT IN ITS EXECUTION. 6.1 THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN CONCELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NEW INTE RNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HIDE OR WITHDRAW FROM OBSER VATION, TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WI THHOLD KNOWLEDGE OF'. THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF T HE INCOME-TAX AUTHORITIES. THERE IS STRICT LIABILITY ON THE ASSES SEE FOR CONCEALMENT OR ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 3 FOR GIVING INACCURATE PARTICULARS WHILE FILING THE RETURN. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY . IT IS OBVIOUS THAT THE PENAL PROVISIONS WOULD OPERATE WHEN THERE IS CONCEA LMENT OF PARTICULARS OF INCOME OR A FAILURE OF DUTY TO DISCL OSE FULLY AND TRULY PARTICULARS OF INCOME, IMPOSED UNDER THE ACT AND TH E RULES THERE UNDER. THE DUTY IS ENJOINED UPON A PERSON TO MAKE A CORRECT AND COMPLETE DISCLOSURE OF HIS INCOME AND IT IS ONLY WH EN HE FAILS IN HIS DUTY BY NOT DISCLOSING HIS INCOME OR PART THEREOF, HE CONCEALS THE PAR- TICULARS OF HIS INCOME. THE DUTY IS ENJOINED UPON H IM TO MAKE A COMPLETE DISCLOSURE OF HIS INCOME AS WELL AS A CORR ECT DISCLOSURE. THEREFORE, IF THE DISCLOSURE MADE OF THE PARTICULAR S OF INCOME IS INCORRECT, THEN ALSO HE COMMITS BREACH OF HIS DUTY. SUCH DEFAULTS ENTAIL THE PENAL CONSEQUENCES CONTEMPLATED BY SECTION 271( 1)(C)(III). 6.2 THAT IN RETURN OF INCOME, AN ASSESSEE IS R EQUIRED TO FURNISH PARTICULARS AND ACCOUNTS ON WHICH SUCH RETURN INCOM E HAS BEEN ARRIVED AT. THESE MAY BE PARTICULARS AS PER ITS BOOKS OF AC COUNT, IF IT HAS MAINTAINED THEM, OR ANY OTHER BASIS UPON WHICH IT H AD ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACCURACY MADE IN S UCH BOOKS OF ACCOUNT OR OTHERWISE WHICH RESULTED IN KEEPING OFF OR HIDING A PORTION OF ITS INCOME IS PUNISHABLE AS FURNISHING INACCURAT E PARTICULARS OF ITS INCOME. LET US EXAMINE WHAT ARE THE DUTIES OF ASSE SSEE UNDER THE ACT AND RULES TO DISCLOSE THERE UNDER PARTICULARS OF IN COME. UNDER SECTION 139(1) OF THE ACT WHERE IN, IT WAS, INTER ALIA, PRO VIDED THAT EVERY PERSON, IF HIS TOTAL INCOME IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THE ACT DURING THE PREVIOUS YEAR, EXCEEDED THE MAXI MUM AMOUNT WHICH WAS NOT CHARGEABLE TO INCOME-TAX, SHALL FURNISH A R ETURN OF HIS INCOME IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIB ED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRES CRIBED. IT WAS, THEREFORE, OBLIGATORY ON A PERSON WHOSE TOTAL INCOM E EXCEEDED THE MAXIMUM AMOUNT WHICH WAS NOT CHARGEABLE TO INCOME-T AX, TO FURNISH A RETURN OF HIS INCOME DURING THE PREVIOUS YEAR, IN THE PRESCRIBED FORM. SUCH RETURN IS REQUIRED TO BE VERIFIED IN THE PRESC RIBED MANNER. NOT ONLY IS HE OBLIGED TO FURNISH RETURN OF HIS INCOME, MEANING THEREBY TO DISCLOSE FULLY AND TRULY ALL HIS INCOME, BUT HE IS ALSO REQUIRED TO SET FORTH OTHER PARTICULARS AS MAY BE PRESCRIBED. THE WORD PRESCRIBED AS DEFINED BY SECTION 2(33) MEANS, PRESCRIBED BY THE RULES UNDER THE ACT. THE FORMS ARE, ACCORDINGLY, PRESCRIBED BY THE RULES FRAMED UNDER THE ACT. SECTION 140 LAYS DOWN AS TO BY WHOM SUCH RETUR N CAN BE SIGNED AND VERIFIED. 6.3 RULE 12 OF THE RULES FRAMED UNDER THE AC T PRESCRIBE THE FORMS IN WHICH THE RETURN OF INCOME IS REQUIRED TO BE FUR NISHED. THE RETURN IS REQUIRED TO BE VERIFIED IN THE MANNER INDICATED IN THE FORM. BY SUCH VERIFICATION THE ASSESSEE DECLARED TO THE BEST OF H IS KNOWLEDGE AND BELIEF THAT THE INFORMATION GIVEN IN THE RETURN AND THE ANNEXURE AND STATEMENTS ACCOMPANYING IT WAS CORRECT AND COMPLETE AND THAT THE AMOUNT OF TOTAL INCOME AND OTHER PARTICULARS SHOWN THEREIN WERE TRULY STATED AND RELATED TO THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN QUESTION. IT WAS ALSO TO BE STATED THEREIN ON SOLEMN DECLARATION THAT NO OTHER INCOME ACCRUED OR AROSE OR WAS RECEIV ED BY THE ASSESSEE AND THAT THERE WAS NO OTHER INCOME INCLUDING INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH THE ASSESSEE WAS CHARGEA BLE TO TAX UNDER THE ACT. IT WILL ALSO BE NOTED FROM THE CONTENTS OF THE PRESCRIBED FORMS ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 4 OF THE RETURN OF INCOME THAT THE ASSESSEE IS REQUIR ED TO GIVE VARIOUS PARTICULARS OF INCOME UNDER DIFFERENT HEADS. FOR EX AMPLE, IN THE FORM NO. 2 OF RETURN OF INCOME PRESCRIBED FOR PERSONS OT HER THAN COMPANIES AND THOSE CLAIMING EXEMPTION UNDER SECTION 11 DURIN G THE RELEVANT ASSESSMENT YEARS, THE STATEMENT OF TOTAL INCOME IN PART-I COVERED SIX HEADS OF INCOME, NAMELY, SALARIES, INTERESTS ON SEC URITIES, INCOME FROM HOUSE PROPERTIES (THE PARTICULARS OF WHICH WERE TO BE GIVEN AS PER ANNEXURE-II), PROFITS AND GAINS OF BUSINESS OR PROF ESSION, (THE PARTICULARS OF WHICH WERE TO BE GIVEN AS PER ANNEXU RE II), CAPITAL GAINS AND INCOME FROM OTHER SOURCES. THE AGGREGATE OF ITE M NOS. 1 TO 6 WAS TO BE SHOWN AGAINST ITEM NO. 7. THEREAFTER, DEDUCTI ONS SPECIFIED BELOW ITEM 7 WERE TO BE MADE IN RESPECT OF BROUGHT-FORWAR D LOSS OF EARLIER YEAR AND THE BALANCE WAS TO BE STRUCK FROM WHICH AM OUNT DEDUCTIBLE UNDER CHAPTER VI-A OF THE ACT AND THE AMOUNT OF ANN UITY DEPOSIT WERE TO BE DEDUCTED, LEADING TO THE FIGURE OF THE TOTAL INCOME. IN PART-II, DEDUCTIONS UNDER CHAPTER VI-A WERE TO BE ENUMERATED FOR WORKING OUT THE TOTAL DEDUCTION, WHICH WAS TO BE CARRIED TO PAR T-I. IN PART III OF THE RETURN, STATEMENT OF SUMS INCLUDED IN TOTAL INCOME IN RESPECT OF WHICH INCOME-TAX IS NOT PAYABLE OR WHICH QUALIFY FOR DEBA TE OR DEDUCTION OF INCOME-TAX, WAS TO BE FURNISHED WITH THE REQUIRED P ARTICULARS. IN PART IV, SUMS WHICH ARE NOT INCLUDED IN PART I AND CLAIM ED TO BE NOT TAXABLE WERE TO BE STATED. THE STATEMENT OF TAX DEDUCTED AT SOURCE AND ADVANCE TAX PAID WAS TO BE FURNISHED AT PART V, GIV ING PARTICULARS OF THE ADVANCE TAX PAID AGAINST SALARIES, INTEREST ON SECURITIES, OTHER INTEREST, DIVIDENDS AND ANY OTHER INCOME. STATEMENT OF PARTICULARS REQUIRED UNDER SECTION 139(6) WAS TO BE FURNISHED A S PER PART VI. THE PARTICULARS OF PROFITS AND GAINS OF BUSINESS WHICH WERE TO BE FURNISHED AS PER ANNEXURE III TO THE RETURN SHOW THAT AS MANY AS 37 PARTICULARS WERE TO BE FILLED IN FOR WORKING OUT NET PROFIT OR LOSS CARRIED TO PART I OF THE RETURN. AS PER THE NOTES BELOW ANNEXURE III, TH E ASSESSEE WAS REQUIRED TO ATTACH PROFIT AND LOSS ACCOUNT AND BALA NCE SHEET AND OTHER PARTICULARS MENTIONED IN THE NOTE, STATEMENT OF PAR TICULARS REGARDING DEPRECIATION AND DEVELOPMENT REBATE WAS ALSO TO BE SUBMITTED AS PER SECTION 2 OF ANNEXURE III. AT THE END OF THE FORM T HE PRESCRIBED VERIFICATION WAS REQUIRED TO BE MADE, INTER ALIA, T O THE EFFECT THAT THE INFORMATION GIVEN IN THE RETURN AND THE ANNEXURE AN D THE STATEMENTS ACCOMPANYING IT WAS CORRECT AND COMPLETE AND THAT T HE AMOUNT OF TOTAL INCOME AND OTHER PARTICULARS SHOWN WERE TRULY STATE D AND RELATED TO THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. A STATEMENT WAS ALSO REQUIRED TO BE MADE THAT NO OTHER INCOME ACCRU ED OR AROSE TO OR WAS RECEIVED BY THE ASSESSEE. IT WILL, THUS, BE SEE N THAT THE FORM OF RETURN OF INCOME INCLUDED A VARIETY OF PARTICULARS TO BE DISCLOSED AND THE PARTICULARS OF INCOME TO BE DISCLOSED CAN BE SE EN AGAINST THE ITEMS WHICH RELATED TO DISCLOSURE OF INCOME BESIDES PARTI CULARS OTHER THAN THOSE WHICH RELATED TO THE INCOME OF THE ASSESSEE, SUCH AS HIS NAME, ADDRESS, STATUS, ETC. THE FORMS OF RETURNS ARE OBVI OUSLY PREPARED IN THE CONTEXT OF THE DUTY OF A PERSON TO DISCLOSE HIS INC OME FROM VARIOUS SOURCES UNDER VARIOUS HEADS OF INCOME AS STATUTORIL Y PROVIDED AND HIS DUTY TO DISCLOSE HIS TOTAL INCOME IN THE RETURN. TH E EXTENT OF HIS TOTAL INCOME WILL DETERMINE THE TOTAL INCOME-TAX LIABILIT Y OF A PERSON. TOTAL INCOME IS DEFINED IN SECTION 2(45) AND IT MEANS TH E TOTAL AMOUNT OF INCOME COMPUTED IN THE MANNER LAID DOWN IN THE ACT. THUS, FOR ARRIVING AT THE TOTAL INCOME, THE INCOME DERIVED FROM ALL SO URCES IS TO BE CONSIDERED AS PROVIDED BY SECTION 5, WHEN IT IS REC EIVED OR DEEMED TO BE RECEIVED BY A PERSON. CERTAIN INCOMES WHICH ARE ENUMERATED IN ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 5 SECTION 10 ARE NOT INCLUDED IN THE TOTAL INCOME. AL L INCOME FOR THE PURPOSE OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME IS REQUIRED TO BE CLASSIFIED UNDER DISTINCT HEADS OF I NCOME SUCH AS SALARIES, INCOME FROM HOUSE PROPERTY, PROFIT AND GA INS OF BUSINESS OR PROFESSION, CAPITAL GAINS AND INCOME FROM OTHER SOU RCES, AS ENUMERATED IN SECTION 14. 6.4 THE INCOME CHARGEABLE TO INCOME-TAX UNDER T HE HEAD SALARY IS THE NATURE OF THE INCOME INDICATED IN SECTION 15 TO BE COMPUTED AFTER MAKING THE DEDUCTIONS MENTIONED IN SECTION 16. THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY UNDER SECTION 22 IS TO BE COMPUTED AFTER MAKING DEDUCTIONS MENTIONED IN SECTION 24. TH E INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION IS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTIONS 30 TO 43A AS PROVIDED IN SECTIONS 28 AND 2 9 THEREOF. THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS IS REQUIRED TO BE COMPUTED AFTER MAKING DEDUCTIONS UNDER SECTION 48. FINALLY, THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES IS TO BE COMPUTED AFTER MAKING THE DEDUCTIONS MENTIONED IN S ECTION 57. THUS, UNDER EACH HEAD OF INCOME, THERE ARE PROVISIONS FOR DEDUCTIONS WHICH ARE TO BE MADE WHILE COMPUTING THE INCOME CHARGEABL E UNDER THAT HEAD. IT, THEREFORE, FOLLOWS THAT IT IS AN OBLIGATO RY DUTY CAST UPON A PERSON FILING THE RETURN OF INCOME TO DISCLOSE ALL HIS INCOME DERIVED FROM ANY SOURCE UNDER VARIOUS HEADS AND INDICATE TH E 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, IN WHICH NOTICE IS ISSUED ON THE PERSO N WHO HAS MADE THE RETURN, TO PRODUCE ACCOUNTS, DOCUMENTS OR FURNISH V ERIFIED INFORMATION IN WRITING INCLUDING STATEMENT OF ALL ASSETS, ETC. HOWEVER, WHERE THE ITO IS SATISFIED THAT THE RETURN IS CORRECT AND COM PLETE, AS WERE THE WORDINGS OF SECTION 143(1) AT THE RELEVANT TIME, HE HAD TO ASSESS THE TOTAL INCOME WITHOUT REQUIRING THE PRESENCE OF THE ASSESSEE OR PRODUCTION BY HIM OF ANY EVIDENCE THAT THE RETURN I S CORRECT AND COMPLETE, AS LAID DOWN IN SECTION 143(1). WHERE, HO WEVER, THE ITO WAS NOT SATISFIED WITHOUT THE PRESENCE OF THE ASSESSEE OR PRODUCTION OF EVIDENCE THAT THE RETURN IS CORRECT AND COMPLETE, HE WAS REQUIRED TO ISSUE NOTICE ENABLING THE ASSESSEE TO PRODUCE EVIDE NCE ON WHICH HE MAY RELY IN SUPPORT OF THE RETURN. THE TOTAL INCOM E IS, IN SUCH CASES OF REGULAR ASSESSMENT ASSESSED AFTER HEARING THE EVIDE NCE ADDUCED AND CONSIDERING ALL MATERIAL GATHERED BY THE ITO AS PRO VIDED IN SECTION 143(3). IT, THEREFORE, FOLLOWS THAT IN THE ASSESSME NT PROCEEDINGS UNDER SECTION 143(2)(3), THE ITO CAN FIND OUT WHETHER THE RETURN OF INCOME WAS CORRECT AND COMPLETE. IF HE HOLDS THAT THE RETU RN OF INCOME WAS NOT CORRECT OR THAT IT WAS NOT COMPLETE IN RESPECT OF T HE PARTICULARS OF INCOME WHICH WERE REQUIRED TO BE STATED IN THE RETU RN, HE WILL REACH THE CORRECT FIGURE OF TOTAL INCOME AND DETERMINE THE SU M PAYABLE BY THE ASSESSEE OR REFUNDABLE ON THE BASIS OF SUCH ASSESSM ENT. IF THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, BY REASON OF OMISSION OR FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT, REASSESSMENT ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 6 PROCEEDING CAN BE INITIATED AS PROVIDED UNDER SECTI ON 147. THIS AGAIN SHOWS THAT FULL AND TRUE DISCLOSURE OF INCOME IS A PRIMARY OBLIGATION OF THE ASSESSEE. 6.5 THE AO IS TO GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE AS REQUIRED UNDER THE ACT. SECTION 274 OF THE INCOME-T AX ACT, 1961 PROVIDES THAT NO ORDER IMPOSING A PENALTY UNDER THI S CHAPTER WOULD BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THE OPPORTUN ITY OF HEARING GIVEN BY THE NOTICE UNDER SECTION 271(1)(C), OBVIOU SLY IS AGAINST SUCH CONCEALMENT AND INACCURACY AS IS DETECTED IN THE AS SESSMENT PROCEEDINGS. THIS IS TO ENSURE THAT THE ASSESSEE GE TS AN ADEQUATE OPPORTUNITY IN RESPECT OF THE DEFAULT WHICH IS DETE CTED AND ALLEGED AGAINST HIM AND WHICH FORMS THE BASIS OF THE ISSUAN CE OF THE NOTICE UNDER SECTION 271(1)(C) AND TO ENSURE THAT HE IS NO T PUT TO PERIL OF ANSWERING AGAINST SOMETHING WHICH NEVER WAS SPECIFI CALLY DETERMINED AS HIS DEFAULT OR IN RESPECT OF WHICH NO NOTICE WAS ISSUED BY THE ITO, WHOSE SATISFACTION ALONE MATTERED AT THE STAGE OF T HE INITIATION OF THE PENALTY PROCEEDINGS. WHETHER THE BURDEN OF PROOF IN A GIVEN CASE HAS BEEN DISCHARGED ON A SET OF FACTS IS A QUESTION OF FACT. THERE WAS CONCEALMENT OR NOT IS, ORDINARILY, A QUESTION OF FA CT. ONCE BEARING IN MIND THE CORRECT PRINCIPLES COMES TO THE CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE ONUS, IT BECOMES A CONCLUSION OF FACT. SIMILARLY, WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE WAS BONA FIDE OR NOT IS A QUESTION OF FACT. THIS ASPECT OF THE MATTER CA N BE EXPLAINED BY A SIMPLE PRACTICAL EXAMPLE. DETERMINATION OF TOTAL IN COME SAYS PREPARATION OF ONE TYPE OF SWEET DISH, WHICH IS TO BE FINALLY COOKED BY THE ITO WHO IS TECHNICAL AND EXPERT IN THIS REGARDS . HOWEVER THE ASSESSEE MAY COOK SUCH DISH OF TOTAL INCOME/ DISH ON THE BASIS OF MATERIAL AVAILABLE WITH HIM LIKE BOOKS OF ACCOUNT A ND OTHER MATERIAL SAY SUGAR, GHEE, ETC AND FURNISH IN RETURN OF INC OME . IF THE ITO FOUND THAT THE DISH/ INCOME PREPARED BY THE ASSESSEE IS I N ACCORDANCE WITH TEST OF LAW HE MAY ACCEPT AS IT IS. IF THE ITO FOUN D THAT THE DISH PREPARED BY THE ASSESSEE IS NOT IN ACCORDANCE WITH LAW HE CAN PREPARE SUCH DISH IN ACCORDANCE WITH LAW ON THE BASIS OF RA W MATERIAL FURNISHED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCE IF TEST OF SWEET DISH IS SOME DIFFERENT THAN THE DISH PREPARED BY T HE ASSESSEE, IT CANNOT SAID THE ASSESSEE HAS CONCEALED THE PARTICU LARS OF HIS DISH/ INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF S UCH DISH/ INCOME .IF THE ASSESSEE PREPARED NAMKIN , SALT DISH WHERE SWEE T DISH WAS REQUIRED AND FURNISHED SALT TO AO INSTEAD OF SUGAR , IN THESE CIRCUMSTANCES THAT CASE IS CERTAINLY A CASE OF CONC EALED THE PARTICULARS OF HIS DISH/ INCOME OR HAS FURNISHED INACCURATE PAR TICULARS OF SUCH DISH/ INCOME. 6.6 THERE CANNOT BE A STRAIGHT JACKET FORMU LA FOR DETECTION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INAC CURATE PARTICULARS OF INCOME AND INDEED CONCEALMENT OF PARTICULARS OF INC OME AND IN ACCURATE PARTICULARS OF INCOME MAY AT TIMES OVERLAP . IT DEPENDS UPON THE FACTS OF THE EACH CASE. IN THE ASSESSMENT PROCE EDINGS THE ITO WHILE ASCERTAINING THE TOTAL INCOME CHARGEABLE TO TAX WOU LD BE IN A POSITION TO DETECT THE SPECIFIC OR DEFINITE PARTICULARS OF I NCOME CONCEALED OR OF WHICH FALSE PARTICULARS ARE FURNISHED. WHERE IN THE CONSTITUENTS OF INCOME RETURNED, SUCH SPECIFIC OR DEFINITE PARTICUL ARS OF INCOME ARE DETECTED AS CONCEALED, THEN EVEN IN THE TOTAL INCOM E FIGURE TO THAT ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 7 EXTENT THEY REFLECT, IT WOULD AMOUNT TO CONCEALMENT TO THAT EXTENT. IN THE SAME WAY WHERE SPECIFIC AND DEFINITE PARTICULAR S OF INCOME ARE DETECTED AS INACCURATE, THEN SUCH FIGURE WILL ALSO MAKE THE TOTAL INCOME INACCURATE IN PARTICULARS TO THE EXTENT IT D OES NOT INCLUDE SUCH INCOME. IN OTHER WORDS THE AO CANNOT INVOKED PROVIS ION OF SECTION271 (1) (C) ON THE BASIS ROUTINE AND GENERAL PRESUMPTI ONS. WHETHER IT BE A CASE OF ONLY CONCEALMENT OR OF ONLY INACCURACY OR B OTH, THE PARTICULARS OF INCOME SO VITIATED WOULD BE SPECIFIC AND DEFINIT E AND BE KNOWN IN THE ASSESSMENT PROCEEDINGS BY THE ITO, WHO ON BEING SATISFIED ABOUT EACH CONCEALMENT OR INACCURACY OF PARTICULARS OF IN COME WOULD BE IN A POSITION TO INITIATE THE PENALTY PROCEEDINGS ON ONE OR BOTH OF THE GROUNDS OF DEFAULT AS MAY HAVE BEEN SPECIFICALLY AN D DIRECTLY DETECTED. 6.7 IN ADDITION TO MAIN PROVISIONS OF CONCEALMEN T HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME THERE ARE DEEMED TO REP RESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED .THE DEEMED CONCEALMENT IS PROVIDED IN EXPLANATIONS .OFTEN A QUESTION AROSE WHETHER IN CASES WHERE ADDITIONS OR DISALLOWANCES M ADE BY THE ITO THE PENAL PROVISIONS OF SECTION271 (1) WOULD ATTR ACT. EXPLANATION 1 TAKES CARE OF THIS SITUATION. THE EXPLANATION TO SE CTION 271(1) OF THE ACT READS AS UNDER:- EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATE RIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (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 EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O F 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 WHI CH PARTICULARS HAVE BEEN CONCEALED. 6.8 A CONSPECTUS OF THE EXPLANATION MAKES IT CLEAR THAT THE STATUTE VISUALISED THE ASSESSMENT PROCEEDINGS AND P ENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT O F EACH OTHER. IN ESSENCE, THE EXPLANATION IS A RULE OF EVIDENCE. PRE SUMPTIONS WHICH ARE REBUTTING TABLE IN NATURE ARE AVAILABLE TO BE DRAWN . THE INITIAL BURDEN OF DISCHARGING THE ONUS OF REBUTTAL IS ON THE ASSES SEE. THE RATIONALE BEHIND THIS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. SECTION 106 OF THE INDIA N EVIDENCE ACT, 1872, GIVES STATUTORY RECOGNITION TO THIS UNIVERSAL LY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION CONFERRED ON THE A SSESSING OFFICER AS TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. EX PLANATION 1 COMES INTO OPERATION WHEN, IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON, THERE IS FAILURE TO OFFER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALS E BY THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY, OR AN EXP LANATION IS OFFERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE, THE AMO UNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. AS PER THE PROVISION OF EXPLANATION 1, THE ONUS TO ESTABLISH T HAT THE EXPLANATION ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 8 OFFERED WAS BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED B Y HIM WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. THE EXPLANATIO N OF THE ASSESSEE FOR THE PURPOSE OF AVOIDANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANATION; IT SHOULD NOT BE A FANTASTIC OR FANCIF UL ONE. AS INDICATED ABOVE, THE CONSEQUENCE FOLLOWS AS A MATTER OF LAW. THE BURDEN IS ON THE ASSESSEE. IF HE FAILS TO DISCHARGE THAT BURDEN, THE PRESUMPTION THAT HE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF IS AVAILABLE TO BE DRAWN. 6.9 PART A OF THE EXPLANATION TO SECTION 271(1) (C) PROVIDES THAT IF ASSESSEE FAILS TO OFFER AN EXPLANATION OR OFFERS A N EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, THIS EXPLANATION CAN THER EFORE, BE APPLIED ONLY WHERE THE ASSESSEE HAS EITHER NOT OFFERED ANY EXPLANATION OR WHERE HE HAS OFFERED ANY EXPLANATION, THE SAME FOU ND TO BE FALSE BY THE ITO ETC. IN OTHER WORDS , WHERE THE ASSESSEE OF FERS SOME EXPLANATION, IT IS ONLY THE PROVING BY THE ASSESSEE OFFICER OF THE EXPLANATION TO BE FALSE, THAT PART A OF THE EXPLANA TION MAY BE ATTRACTED, MERE NON ACCEPTANCE OF EXPLANATION OFFER ED BY THE ASSESSEE CANNOT FORM A BASIS FOR THE SATISFACTION OF ITO TO THE EFFECT THAT THE ASSESSEE HAS CONCEALED PARTICULAR OF HIS INCOME. TH E ITO MUST HAVE SOME DEFINITE EVIDENCE TO REFUSE THE ASSESSEES CLA IM OR EVIDENCE OR EXPLANATION. 6.10 THE ESSENCE OF PART B OF THE EXPLANATION I S THAT THE PERSON MUST PROVIDE AN EXPLANATION WHICH IS BON FIDE AND H E SHOULD SUBSTANTIATE THAT EXPLANATION BY SOME EVIDENCE WITH HIM. IF HE FAILS TO DO SO, HIS EXPLANATION MAY BE TREATED AS UNTENABLE. BUT WHEN THE ASSESSEE IS ABLE TO OFFER REASONABLE EXPLANATION BA SED ON SOME EVIDENCE, THE ITO CANNOT INVOKE PART B OF THE EXPLA NATION UNLESS HE HAS GIVEN FINDING BASED ON SOME CONTRADICTORY EVIDE NCE TO DISAPPROVE THAT EXPLANATION OFFERED BY THE ASSESSEE WHICH THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH E XPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, 6.11 BEFORE COMING TO THE FACTS OF THE CASE, WE WOU LD LIKE TO DEAL WITH THE JUDGMENTS CITED BY THE LEARNED DR. IN THE CASE OF CIT VS. MUSSADILAL RAM BHAROSE, 165 ITR 14 (SC), THE APEX C OURT HELD THAT INCASE WHERE RETURN OF INCOME IS LESS THAN 80% OF T HE ASSESSED INCOME, THE BURDEN OF PROOF RAISED THE PRESUMPTION OF FRAUD OR GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. THE PRESUMPTIO N, HOWEVER, A REBUTTABLE ONE. IN THE CASE UNDER CONSIDERATION, WE FIND THAT THE ASSESSEE HAS DISCHARGED HIS BURDEN BY FILING ALL TH E NECESSARY DETAILS INCLUDING RECONCILIATION AND CONFIRMATION OF THE PA RTIES. THEREFORE, THE SAID JUDGMENT CITED BY THE LEARNED DR IS NOT APPLIC ABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. 6.12 IN THE CASE OF K.P. MADHUSUDHANAN V. CIT [2001 ] 251 ITR 99(SC), THE APEX COURT HELD THAT NO EXPRESS INVOCAT ION OF THE EXPLANATION TO S. 271 IN THE NOTICE UNDER S. 271 IS NECESSARY FOR APPLYING THE PROVISIONS OF SAID EXPLANATION; AFTER THE INTRODUCTION OF EXPLANATION, THERE IS NO QUESTION OF PROOF OF MENS REA. THIS JUDGMENT ALSO DOES NOT HELP THE CASE OF REVENUE AS THE FACTS OF THE SAID CASE ARE ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 9 DIFFERENT. THE LEARNED DR HAS ALSO RELIED UPON THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF CIT VS. ISSAC JOHN & CO., [263 ITR 579 (KER) THE FACTS OF THAT CASE ARE ALSO DIFFEREN T FROM THE FACTS OF THE CASE UNDER CONSIDERATION. THE LEARNED DR HAS ALSO R ELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F UNION OF INDIA & ORS. VS. DHARMENDRA TEXTILE PROCESSORS & ORS. (SC) (CIVIL APPEAL NOS. 10289-10303 OF 2003) WHEREIN IT HAS BEEN HELD THAT PENALTY U/S 271(1)(C) IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. IN THE C ASE UNDER CONSIDERATION, THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAS F URNISHED ALL THE RELEVANT MATERIAL WHICH ARE NECESSARY FOR COMPUTATI ON OF TOTAL INCOME. THE ASSESSEE NEITHER FURNISHED INACCURATE PARTICULA RS NOR HAS CONCEALED ANY PARTICULARS OF HIS INCOME. THE ASSESS EE FURNISHED EXPLANATION WHICH WAS NOT FOUND FALSE BY THE ASSESS ING OFFICER. THE EXPLANATION FURNISHED BY THE ASSESSEE HAS ALSO BEEN SUBSTANTIATED BY NECESSARY MATERIAL EVIDENCE, IN THE FORM OF BOOKS O F ACCOUNT WHICH WAS MAINTAINED ON A PARTICULAR SYSTEM OF ACCOUNTING AND RECONCILIATION ETC. IN THE CASE UNDER CONSIDERATION, IT IS ALSO TO MENTION THAT THE ASSESSING OFFICER IMPOSED PENALTY WITHOUT POINTING OUT EXACT DEFECT WHETHER THE ASSESSEE HAS CONCEALED PARTICULARS OF I TS INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME OR E XPLANATION FURNISHED BY THE ASSESSEE WAS FALSE. THE ASSESSING OFFICER SI MPLY STATED THAT HE SATISFIED THAT THE ASSESSEE HAS CONCEALED ITS INCOM E WHEREAS WE FIND THAT THERE IS NO SUCH PROVISION OF LEVY OF PENALTY IN RESPECT OF CONCEALMENT OF INCOME. PENALTY U/S 271(1)(C) IS LEV IABLE IF THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF SUCH INCOME. THE SCHEME OF THE ACT IS THAT WHEN ASSESSEE FURNISHED ALL PARTICULARS OF INCOME, IT IS THE DUTY OF THE AS SESSING OFFICER TO COMPUTE TOTAL INCOME AS PER LAW. THE ASSESSING OFFI CER WHILE COMPUTING TOTAL INCOME AS PER LAW, WHICH MAY DIFFER ENT THAN THE AMOUNT DECLARED BY THE ASSESSEE. WHILE MAKING ASSES SMENT, THE ASSESSING OFFICER IS TO POINT OUT EXACT FAILURE OF THE ASSESSEE FOR WHICH PENALTY U/S 271(1)(C) IS LEVIABLE. THE ASSESSING OF FICER HAS FAILED TO POINT OUT ANY SUCH DEFAULT. IN FACT, THE ASSESSEE H S FURNISHED NECESSARY EXPLANATION WHICH HAS BEEN SUBSTANTIATED WITH THE NECESSARY EVIDENCES AND THE SAME WERE NOT FOUND FAL SE BY THE ASSESSING OFFICER. UNDER THESE CIRCUMSTANCES, WE AR E OF THE CONSIDERED VIEW THAT PENALTY U/S 271(1)(C) IS NOT LEVIABLE, TH EREFORE, WE CANCEL THE PENALTY OF RS. 1,61,943/- LEVIED BY THE ASSESSING O FFICER. 5. IN THE LIGHT OF ABOVE ORDER OF ITAT, I AM OF THE VIEW THAT THIS IS NOT A FIT CASE TO LEVY PENALTY U/S 271(1)(C). THERE FORE, I HEREBY CANCEL THE PENALTY OF RS. 51,400/- LEVIED BY THE AO U/S 27 1(1)(C). ITA NO. 2354/M/09 KAMAL ROOPCHAND JAIN 10 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 18.11.2009. SD/- (A.L. GEHLOT) ACCOUNTANT MEMB ER DATED: 18 TH NOVEMBER, 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, SMC BEN CH, I.T.A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INITIALS 1. DRAFT DICTATED ON 13.11.09 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 17.11.09 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER