Udaipur Sahakari Upbhokta Thok Bhandar Limited, Shastri Circle, Udaipur v. Assistant Commissioner Of Income Tax, Circle-Ii,Udaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 160 / 2011 Udaipur Sahakari Upbhokta Thok Bhandar Limited, Shastri Circle, Udaipur. ----Appellant Versus Assistant Commissioner of Income Tax, Circle-II,Udaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr.Sharad Kothari. For Respondent(s) : Mr.KK Bissa. _____________________________________________________ HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATIJudgment / Order 24/01/2018 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeal of the department and reversed the view takenby CIT (Appeals). 2.While admitting the appeal, this Court framed followingsubstantial question of law :- "(i) Whether the Tribunal was justified in allowing the appealfiled by the Revenue, thereby, restoring the order ofAssessing Authority passed under Section 271(1)(c) of theIncome Tax Act? (ii) Whether the Tribunal was justified in holding that onfacts finding, a case for imposition of penalty under Section271(1)(c) ibid is made out?” 3.Learned counsel for the appellant contended that while considering the matter, the CIT (Appeals) observed as under :- "5. Decision: 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeal of the department and reversed the view takenby CIT (Appeals). 2.While admitting the appeal, this Court framed followingsubstantial question of law :- "(i) Whether the Tribunal was justified in allowing the appealfiled by the Revenue, thereby, restoring the order ofAssessing Authority passed under Section 271(1)(c) of theIncome Tax Act? (ii) Whether the Tribunal was justified in holding that onfacts finding, a case for imposition of penalty under Section271(1)(c) ibid is made out?” 3.Learned counsel for the appellant contended that while considering the matter, the CIT (Appeals) observed as under :- "5. Decision: I have considered the facts of the case and submissionof the Ld. A/R and found that the AO levied the penalty onthe ground that the debt/loans in this case is not a tradedebt but a loan advanced by the appellant and it is beyonddoubt that no such loan is allowable as expenditure/bad debtas per the provisions of Act and the addition made by the AOhas been confirmed in first appeal by the CIT(A). The Ld. A/Rsubmitted that the appellant is a co-operative society andfiled compete details in respect of bad debt before the AOand has not furnished any inaccurate particulars of income orconcealed the particulars of income. The AO has notestablished the clear concealment or income or furnishing ofinaccurate particulars of income. The AO simply disallowedthe claim of the appellant and not detected any concealmentby bringing some material showing the concealment.Disallowance out of the claim cannot be treated asconcealment. In the case of Ashok Pai Vs. CIT the Hon’bleSupreme Court has held that “if an explanation given by theassessee with regard to the mistake committed by him hasbeen treated to be bona fide and it has been found as of factthat he had acted on the basis of wrong legal advice, thequestion of his failure to discharge his burden in terms ofExplanation appended to Section 271(1)(c) would not arise.It signifies a deliberate act of omission on the part of theassessee. Such deliberate act must be either for the purposeof concealment of income or furnishing of inaccurateparticulars. Order imposing penalty being quasi criminal innature burden lies on the department to establish that theassessee had concealed his income, if an explanation givenby the assessee has been treated as bona fide, the questionof falling to discharge the burden under Explanation tosection 271(1)(c) would not arise”. In the instant case theappellant has claimed the loan amount as bad debt andfurnished complete details before the AO but disallowed theclaim and confirmed in appeal. However, confirmation ofdisallowance made by the AO is not a reason forestablishing the concealment of income or furnishing ofinaccurate particulars of income. This is a case of a co-operative society governed by the State Government and theaccounts of the appellant is audited by statutory auditors aswell as under Section 44AB of the Act. The appellant madeprovision for bad debt and has shown this amount in thebalance sheets also. Therefore the question of detection ofconcealment does not arise. Full particulars were declared bythe appellant but due to some difference of opinion, the AOmade the disallowance. The conduct of the appellant is notcontumacious but bonafide. Therefore, it cannot be said thatthe appellant has furnished inaccurate particulars of incomeor concealed the income. In view of the above, the AO wasnot justified in levying the penalty under Section 271(1)(c)of the Act without establishing clear concealment. Thereforethe order imposing penalty under Section 271(1)(c) isconcealed." 3.1He further contended that the Tribunal has not considered the finding of CIT (Appeals) and observed as under :- 3.1He further contended that the Tribunal has not considered the finding of CIT (Appeals) and observed as under :- "8.We have heard the parties with reference to materialon record and the precedents cited at bar. The assesseemade a claim for deduction on account of provision for baddebt of the amount which, in fact, was not a bad debt, butwas a loan advanced by it on interest to another co-operative society. No statutory provision of I.T. Act in respectof bona fides of its claim or deduction under the relevantstatute was brought to the notice of the authorities below oreven before us. It was the burden of the assessee to showthat the amount added or disallowed in computing the totalincome, could not be deemed to represent his income, inrespect of which particulars have been concealed. This viewfinds support from the decisions rendered by Hon’ble DelhiHigh Court at page 161 of the report says that the burden ison the assessee to discharge his onus that the amountadded or disallowed in computing total income, could not bedeemed to represent his income in respect of which theparticulars have been concealed. The relevant passage inthis respect is reproduced as under: “A conspectus of the Explanation added by the FinanceAct, 1964 and the subsequent substituted Explanationsmakes it clear that the statute visualized assessmentproceedings and penalty proceedings to be whollydistinct and independent of each other. In essence, theExplanation (after 1964) is a rule of evidence.Presumptions which are rebuttable in nature areavailable kto be drawn. The initial burden ofdischarging the onus of rebuttal is on the assessee. Therationale behind this view is that the basic facts arewithin the special knowledge of the assessee. Section106 of the Indian Evidence Act, 1872 ( in short the“Evidence Act”) gives statutory recognition to thisuniversally accepted rule of evidence. There is nodiscretion conferred on the Assessing Officer as towhether he can invoke the Explanation or not.Explanation I, which primarily concerns the case athand, automatically comes into operation when inrespect of any facts material to the computation of thetotal income of any person, there is failure to offer anexplanation or the explanation is offered which is foundto be false by the Assessing Officer or the firstappellate authority, or an explanation is offered whichis not substantiated. In such a case, the amount addedor disallowed in computing the total income is deemedto represent the income in respect of which theparticulars have been concealed.” 9. Again in Kishore Kumar Shamji (2000) ITR (Ker), Hon’bleKerala High Court has also laid down that the onus is on theassessee to substantiate and prove that he has not concealed the particulars of income and his explanation isbonafide. This becomes clear from the following passage atpage 710 of the report- 9. Again in Kishore Kumar Shamji (2000) ITR (Ker), Hon’bleKerala High Court has also laid down that the onus is on theassessee to substantiate and prove that he has not concealed the particulars of income and his explanation isbonafide. This becomes clear from the following passage atpage 710 of the report- “The position on and after April, 1, 1976 is clear thatwhere in respect of any item of credit, the assessee hasoffered an explanation which the taxing officer hasconsidered to be false or the assessee has offered andexplanation but no material or evidence to substantiateit, he shall be deemed to have concealed such incomewithin the meaning of Section 271(1)(c). By operationof the Explanation the onus lay on the assessee andfindings given at the assessee offered nothing beyondthe explanation offered at the assessment stage or ifno acceptable or plausible explanation, as indicatedabove, is offered. In such cases, it cannot be said thatthe assessee had discharged the onus even by apreponderance of probabilities.”where in respect of any item of credit, the assessee hasoffered an explanation which the taxing officer hasconsidered to be false or the assessee has offered andexplanation but no material or evidence to substantiateit, he shall be deemed to have concealed such incomewithin the meaning of Section 271(1)(c). By operationof the Explanation the onus lay on the assessee andfindings given at the assessee offered nothing beyondthe explanation offered at the assessment stage or ifno acceptable or plausible explanation, as indicatedabove, is offered. In such cases, it cannot be said thatthe assessee had discharged the onus even by apreponderance of probabilities.” 10. The assessee is, thus, found to have disclosed falseparticulars with respect to claim as bad debt and as such, byfurnishing inaccurate particulars of income has concealed theincome. The judgment in the case of CIT vs. vidyagouriNatwarlal & Other4, (1999) 238 ITR 91 (Guj) has laid downthat in a case where false particulars have been furnished,concealment penalty is exigible. The ld. CIT(A) is, therefore,found to have erred in holding that the burden lay upon theRevenue to establish the concealment on the basis ofperverse finding of fact that the assessee has disclosed allthe facts in the return of income. Keeping in view theaforesaid facts and going by the binding precedent laid downin the case of Dharmendra Textiles Mills (supra), we setaside the order of the ld. CIT(A) and restore the order of theld. Assessing Authority."particulars with respect to claim as bad debt and as such, byfurnishing inaccurate particulars of income has concealed theincome. The judgment in the case of CIT vs. vidyagouriNatwarlal & Other4, (1999) 238 ITR 91 (Guj) has laid downthat in a case where false particulars have been furnished,concealment penalty is exigible. The ld. CIT(A) is, therefore,found to have erred in holding that the burden lay upon theRevenue to establish the concealment on the basis ofperverse finding of fact that the assessee has disclosed allthe facts in the return of income. Keeping in view theaforesaid facts and going by the binding precedent laid downin the case of Dharmendra Textiles Mills (supra), we setaside the order of the ld. CIT(A) and restore the order of theld. Assessing Authority." 3.2He thus contended that the amount which was disallowed by any stretch of imagination cannot be said to be concealmentwhere it has not been reflected in the books of accounts andreturns. 4.We have heard learned counsel for the parties. 5.Taking into consideration that the disallowance of expensesis not accepted to be concealment, in our considered opinion, theconclusions drawn by the CIT (Appeals) are just and proper. Theorder passed by the CIT (Appeals) is affirmed and the orderpassed by the Tribunal is set aside. 6.In that view of the matter, the issues are answered in favour of the assessee and against the department. 3.2He thus contended that the amount which was disallowed by any stretch of imagination cannot be said to be concealmentwhere it has not been reflected in the books of accounts andreturns. 4.We have heard learned counsel for the parties. 5.Taking into consideration that the disallowance of expensesis not accepted to be concealment, in our considered opinion, theconclusions drawn by the CIT (Appeals) are just and proper. Theorder passed by the CIT (Appeals) is affirmed and the orderpassed by the Tribunal is set aside. 6.In that view of the matter, the issues are answered in favour of the assessee and against the department. 7.Accordingly, the appeal stands allowed. (DR. PUSHPENDRA SINGH BHATI)J. (K. S. JHAVERI)J. S.Phophaliya/-127