$ * IN HIGH COURT OF DELHI AT NEW DELHI 4. + ITA 393/2015 PRINCIPAL COMMISSIONER OF INCOME TAX 21 ..... Appellant Through: Mr Sanjay Kumar & Mr Dileep Shivpuri, Advocates. versus PRASHANT SHRIVASTAVA ..... Respondent Through: Mr M.P. Rastogi, Advocate with Mr K.N. Ahuja, Advocate. CORAM: JUSTICE S. MURALIDHAR JUSTICE VIBHU BAKHRU ORDER % 17.11.2015 1. Revenue has filed this appeal against order dated 31st December, 2014 passed by Income Tax Appellate Tribunal ( ITAT ) in ITA No. 5102/Del/2012 for Assessment Year ( AY ) 2008-09. 2. question that arises is whether Assessing Officer ( AO ) was justified in levying penalty on Assessee under Section 271(1)(c) of Act on ground that he had furnished inaccurate particulars thereby concealing his income. ITA No. 393/2015 Page 1 of 7 3. By impugned order, ITAT upheld order dated July, 2012 of Commissioner of Income Tax (Appeals) [CIT (A)] deleting penalty levied by AO. 4. facts in brief are that assessment for AY in question was completed on 30th December, 2010 at income of Rs.80,55,870/- as against disclosed income of Rs.32,00,692/-. This was done by taking net profit @ 5% of gross turnover since Assessee failed to produce supporting vouchers and bills in respect of entries in books of accounts. 5. perusal of order dated 30th December, 2010 of AO reveals that during course of assessment proceedings Assessee has furnished copy of ledger account of expenses, contractual receipts, submission on AIR information, details of wages, source of addition of capital account . AO noted that Assessee failed to furnish vouchers in support of claim of expenses. AO then proceeded to hold that Assessee had failed to produce books of accounts and failed to file various relevant evidences such as vouchers and supportings which are necessary for purpose of completion of assessment. It was concluded that Assessee ITA No. 393/2015 Page 2 of 7 had furnished incorrect particulars thereby concealing his income for which notice for levy of penalty under Section 271(1)(c) was directed to be issued. 6. In penalty order dated 22nd June 2011, AO rejected explanation of Assessee that failure to produce vouchers was because they were unable to be located. Before CIT (A) Assessee pointed out that there was dispute between Assessee and his accountant as result of which account books were not available. accountant had misplaced books of accounts and vouchers and therefore they could not be produced before AO for verification. 7. Learned counsel for Revenue has placed considerable reliance on decision of Supreme Court in Mak Data P. Ltd. v. Commissioner of Income Tax [2013] 358 ITR 593 (SC) to urge that failure to produce vouchers to substantiate accounts attracted Explanation 1 to Section 271 (1) and, therefore, CIT (A) was not justified in deleting penalty. 8. On other hand, learned counsel for Respondent submitted that neither of conditions for attracting Explanation 1 to Section 271(1) are fulfilled in present case. According to him this was not instance where Assessee failed to offer explanation. He submitted that ITA No. 393/2015 Page 3 of 7 failure of Assessee to substantiate entries by producing vouchers was not intentional but was due to circumstances beyond his control, viz., misplacing of vouchers was by accountant engaged by Assessee. Learned counsel for Revenue has countered submission of learned counsel for Respondent and stated that above explanation was afterthought which was put forth by Assessee only at stage of appeal before CIT(A). Before AO Assessee merely contended that he was unable to produce vouchers. 9. facts in Mak Data P. Ltd. v. Commissioner of Income Tax (supra) were that Assessee originally filed return for AY 2004-05 enclosing tax audit report and declaring income of Rs. 16,17,040/-. survey proceeding was undertaken on December 16, 2003 under Section 133A of Act in case of sister concern of Assessee. Certain documents comprising share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income-tax returns and assessment orders and blank share transfer deeds duly signed were unearthed during course of survey proceedings. On that basis show cause notice was issued to Assessee seeking specific information regarding documents found during course of survey. Pursuant to ITA No. 393/2015 Page 4 of 7 show cause notice, Assessee made offer to surrender sum of Rs.40.74 lakhs with view to ending litigation and buying peace. Supreme Court after reproducing Explanation 1 to Section 271(1) observed that surrender by Assessee of additional income with view to ending litigation was not defence recognized in Explanation 1. It was observed it is trite law that voluntary disclosure does not absolve appellant Assessee from mischief of criminal proceedings. law does not provide that making voluntary surrender of concealed income are not to be absolved from penalty . 10. In present case, it is not possible to conclude that there had been any concealment of income as such by Assessee. Although assessment order assessed income by taking net profit rate @ 5% of gross turnover, for same to be considered as concealed income under Section 271(1) (c), either of conditions (A) or (B) of Explanation 1 to Section 271(1) must be fulfilled. In other words, (a) Assessee must fail to offer explanation or should offer explanation which is found to be false or (b) Assessee should offer explanation which it is unable to substantiate and should fail to prove that such explanation is bona fide and that all facts relating to same and material to computation of his total income ITA No. 393/2015 Page 5 of 7 have been disclosed. If either of these conditions is fulfilled, then amount added in computing total income shall be demed to represent income in respect of which particulars of income concealed . 11. It is not Revenue s case that explanation offered by Assessee herein is false. At best it could be stated that Assessee failed to substantiate explanation he offered. explanation was that vouchers were not available. There was dispute that Assessee had with his accountant who appears to have misplaced relevant vouchers. question is whether such explanation can be said to be bona fide. It is one thing to say that explanation about dispute Assessee had with his accountant, as result of which vouchers could not be produced, was not offered in first instance before AO and only subsequently before CIT (A). It is another to state that said explanation was either false or not bona fide. Revenue has not been able to show that explanation offered by Assessee either lacked in bona fides or was false. In circumstances, decision in Mak Data P. Ltd. v. Commissioner of Income Tax (supra) is distinguishable on facts. 12. Court is satisfied that CIT (A) was not in error in accepting ITA No. 393/2015 Page 6 of 7 explanation offered by Assessee and deleting penalty. 13. No substantial question of law arises. 14. appeal is dismissed. S. MURALIDHAR, J VIBHU BAKHRU, J NOVEMBER 17, 2015 pkv ITA No. 393/2015 Page 7 of 7 Principle Commissioner of Income Tax-21 v. Prashant Shrivastava