Trilok Chand Sawla, Jaipur vs Assessee

fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Poddar, Advocate jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph, JCIT -DR

lquokbZ dh rkjh[k@ Date of Hearing : 25 /06/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 26 /06/2015

vkns'k@ ORDER

PER R.P. TOLANI, JM

This is an appeal filed by the assessee against the order of the ld.

ld. CIT(A)-III, Ajmer dated 25-10-2012 for the assessment year 2007-08

challenging the imposition of penalty u/s 271(1) ( c) of the Act.

2.1 Brief facts of the case are that the assessee is Grain and Seed

Merchant., return of income was filed at an income of Rs. 6,54,112/-.

Since the assessee could not give proper explanation in respect of 2 ITA No. 12/JP/2013 Trilok Chand Sawla vs. ACIT Circle- 1,Kota

discrepancy of M/s. Oswal Dal Mill payment of Rs. 1,87,057/-, the AO

made addition by following observation.

''5. Sundry Creditors: In the case of M/s. Oswal Dal Mill, Jhaalawar, it was found that the assessee has no credit balance with it. M/s. Oswal Dal Mill, Jhalawar vide letter dated 17-08-2009 submitted that the account of assessee was closed on 5-03-2007 and there was no dealing with the assessee after that. When the assessee was asked to submit his explanation, he made his submission vide letter dated 25-08-2009. But he failed to submit any satisfactory explanation. Therefore, an addition u/s 68 of Rs. 1,87,057/- is being made because of bogus creditors.''

2.2 Penalty proceedings were initiated qua this addition. The assessee

furnished the reply without offering proper explanation as to how the

creditor has given them a signed confirmation which is at total variance

of information submitted u/s 133(6) of the Act. The AO imposed penalty

by following observations.

''Assessee failed to explain, how different opinion was found by the party. Reply of M/s. Oswal Dal Mill proves strongly that there is fault on end of the assessee. Otherwise, assessee would have preferred an appeal against the assessment order. Assessee made bogus entry in his books to increase total of his balance sheet. This is clear cut indignation that assessee concealed his income and filed inaccurate particulars of his income. 3 ITA No. 12/JP/2013

Trilok Chand Sawla vs. ACIT Circle- 1,Kota

Assessee was give more opportunity vide letter dated 25-03- 2010 to produce evidence in support of your submission and confirmation submitted by you. However, assessee failed to do so.

Further, in view of the Explanation deeming concealment, the assessee has a duty to offer an explanation. But where an application was offered and found to be unreliable, penalty becomes exigible. Also it is held in the case of Raghuveer Soni vs. ACIT (2002), 258 ITR 239 by Rajasthan High Court that if in addition to failure to substantiate the explanation, the assessee also fails to prove that the explanation furnished by him was bona fide and that he has disclosed all material facts necessary for assessment then Explanation 1 to Section 271 (1) ( c) operates.

Looking to the above facts and circumstances of the case, it is held that assessee filed inaccurate particulars of income and concealed its income of Rs. 1,87,057/-.''

2.3 Aggrieved, the assessee preferred first appeal wherein the ld.

CIT(A) confirmed the penalty by following observation.

''4.3 I have considered contentions of the appellant as well as the grounds by the assessee. It is seen that assessee had claimed M/s. Oswal Dal Mill, Chomahala as a creditor which was found to be incorrect claim during enquiry made by the AO u/s 133(6). So the assessee's explanation in support of the credit balance of M/s. Oswal Dal Mill was not proved to be correct and no reconciliation of account is on record. Nothing has been brought on record by the assessee to show that veracity of the assessee's explanation has not been tested. The AO's reliance on the decision of Hon'ble Jurisdictional High Court in case of Raghuveer Soni vs. ACIT (2002), 258 ITR 239 is appropriate where for levy of penalty was upheld because the explanation furnished during the assessment proceedings was found to be false. In the present case also, the explanation of the assessee that M/s. Oswal Dal Mill is the creditor of the assessee to the extent of Rs. 1,87,057/- was not found to be correct and substantiated by the facts of the case and above explanation was not found to be bona fide. The cases was relied upon by the assessee are on their on facts and are distinguishable from the facts of the present case.'' 4 ITA No. 12/JP/2013 Trilok Chand Sawla vs. ACIT Circle- 1,Kota

2.4 Aggrieved, the assessee is now before ITAT, ld. Counsel for the

assessee contends as under:-

(i) the purchases made from the party M/s. Oswal Dal Mill was not doubted and accepted by the ld. AO .

(ii) That the confirmation submitted by the assessee was duly signed by the party M/s. Oswal Dal Mill and PAN of the assessee has also mentioned on the confirmation.

(iii) That in the enquiry no statement of accounts of the assessee was submitted by M/s. Oswal Dal Mill. Only he submitted that the account was closed on 5-03-2007 but no details that how payments were received was given by the assessee.

(iv) That the assessee also submitted the details of payment made in subsequent years.

From the above it is very clear that the document submitted by the a were not false or fabricated. The ld AO did not enquire further to verify the contention of the assessee is correct or not. There is nothing on record which proves that the explanation submitted by the assessee found false or incorrect. Therefore, no penalty is leviable on such additions which were made only on suspicion not on the basis of evidences found during the course of enquiries. We rely on the judgment of the Hon'ble Supreme Court in the case of CIT vs. K.S. Kannan Kunhi 87 ITR 395 wherein it has been held that where the explanation given by the assessee was not examined further even the addition could not be sustained, whereas in our case the addition was sustained without making further enquiry or the explanation given by the assessee. Therefore, penalty is also not sustainable on such cases.'' 5 ITA No. 12/JP/2013 Trilok Chand Sawla vs. ACIT Circle- 1,Kota

Reliance is placed in the case of CIT vs. Coromandal Indag Products (P)

Ltd. (2003) 260 ITR 289 (Mad.)

2.5 The ld. DR on the other hand referred to assessee's letter filed

before the AO on 25-08-2009 to explain the contradiction in the

confirmation copy of M/s. Oswal Dal Mill account filed by the assessee.

Relevant contents of the letter dated 25-08-2009 sent by the assessee is as

under:-

''As informed by your good self vide order shee4t dated 20- 08-2009 that the party has furnished the copy of our account tin his books and stated that no amount is outstanding in his books of account.

Now it is stated that the party has given contradictory statement. One hand he has given confirmation to us and the same was furnished before your goodself duly signed by the party and on the other hand he has furnished other copy of account with Nil Balance.

Under the circumstances, it is stated that the confirmation given by us may kindly be considered and make assessment accordingly.''

2.6 Before the ld. CIT(A), the assessee in his reply has contended as

under:-

''4.2 ..............Being we are of the view that no intention to create problem in our party and therefore, was accepted the addition and paid tax accordingly. Because we don't want to lose our party even he has confirmed wrong 6 ITA No. 12/JP/2013 Trilok Chand Sawla vs. ACIT Circle- 1,Kota

account statement or even controversial one. Once he has confirmed the account which was furnished by us and thereafter furnished other copy of account u/s 133(6) with Nil Balance.''

2.7 It emerges from the record that the assessee did not ask for cross

examination as there was no substance in his version. On the contrary, it

is clear from the conduct of the assessee that he did not deliberately cross-

examine or give any reconciliation statement with a vague excuse i.e. not

spoiling the relation with M/s. Oswal Dal Mill. The assessee claims that

he deals in agricultural produce and the supplier M/s. Oswal Dal Mill is

also an agricultural producer which is far from truth as both are traders

and dealing in commodity.

2.8 Reliance is placed in the case of Union of India vs Dharmendra

Textiles, 306 ITR 277 (SC) for the proposition that the levy of penalty is

a civil liability and not quasi criminal liability. There is no onus on the

Revenue to show mens rea and it is the burden of the assessee to

convincingly demonstrate that explanation is bona fide. The fact that the

assessee made no endeavor to cross-examine the party who having denied

the payment in this year and the fact indicates that asseessee's

explanation lacks bona fides. Since the assessee has failed to establish the 7 ITA No. 12/JP/2013 Trilok Chand Sawla vs. ACIT Circle- 1,Kota

bona fide explanation and penalty has been rightly sustained by the ld.

CIT(A).

2.9 I have heard the rival contentions and perused the material

available on record and find merit in the argument of the ld. DR about

contradiction in the assessee's confirmation account and M/s. Oswal Dal

Mill account. In response to discrepancy of information in reply to notice

u/s 133(6) which was duly confronted; assessee replied that it does not

want to create dispute with the party. No effort was made to reconcile the

data and no cross examination was asked for even from the party as to

how it had signed the confirmation when the amount was already paid to

it. Thus there is apparent contradiction in the assessee's explanation which

lacs bona fide. The assessee has failed to offer satisfactory explanation

for furnishing the inaccurate particulars. Reliance is placed in the case of

Union of India vs Dharmendra Textiles (supra) is well founded. In view

of the facts and circumstances of the case mentioned above, I find no

infirmity in the orders of the lower authorities which are upheld. Thus the

penalty imposed u/s 271(1)(c ) is upheld.

8 ITA No. 12/JP/2013

Trilok Chand Sawla vs. ACIT Circle- 1,Kota

3.0 In the result, the appeal of the assessee is dismissed.

Order pronounced in the open court on 26 /06/2015.

Sd/-

vkj-ih-rksykuh½ (R.P.Tolani) U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 26/06/ 2015

*Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Trilok Chand Sawla, Ramganjmandi

2. izR;FkhZ@ The Respondent- The ACIT, Circle- 1, Kota

3. vk;dj vk;qDr¼vihy½@ CIT(A).

4. vk;dj vk;qDr@ CIT

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No.12/JP/2013)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar