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TMI Blog1995 (5) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... essee amounted to Rs. 10,27,295. The Assessing Officer noticed that as per the current account of the assessee in the books of M/s Narayanan Co., and as per his accounts with Bank of Cochin, Parur Central Bank and South Indian Bank, the assessee had made investments totalling to Rs. 12,37,800 during the same period. Since the withdrawals by the assessee during the year amounted to Rs. 10,27,295 only, the Assessing Officer asked the assessee to explain the source for the difference of Rs. 2,10,505 (Rs. 12,37,800 minus Rs. 10,27,295). The assessee's explanation in this regard was as under: "In meeting the total investment during the period 22nd Aug., 1980 to 21st Dec., 1980 you have only considered the withdrawals from the firm, banks and loan from M/s Archana Vessels from that period alone. The cash in hand available with me from earlier withdrawals from the firm, temporary loans from my relations and friends were not considered." The Assessing Officer did not accept the explanation of the assessee. According to him, the assessee had neither pointed out the details of the persons from whom the alleged loans had been taken nor furnished any evidence in support of the claim. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 22nd Aug., 1980 to 14th Dec., 1980 as follows: . Rs. Bank of Cochin 7,59,800 Parur Central Bank 1,13,000 South Indian Bank 1,15,000 Building construction 2,50,000 . 12,37,800 As against this, he gave credit for withdrawals from 22nd Aug., 1980 to 14th Dec., 1980 from banks and from the account of M/s Narayanan Co., in an extent of Rs. 10,27,295 and took the difference as unexplained investments. The learned CIT(A) estimated the opening cash balance, i.e., cash balance available as on 1st April, 1980 at Rs. 80,000 on estimate basis. He gave credit for lorry income in a sum of Rs. 48,000 and thus determined the unexplained investments at Rs. 1,00,000. It is on this, penalty has been levied. The assessee's explanation, is that the withdrawals prior to 22nd Aug., 1980 from the firm M/s Narayanan Co. and from banks were not considered in determining the unexplained investments. From the order dt. 15th Oct., 1984 in the assessment, it is seen that the Assessing Officer has met this argument partly and only partly in para 4 of his order, wherein he stated that "the other explanations that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during festival seasons and that he had signed an agreement regarding the property with Sri Subramonia Marar, but he had not paid any amount as mentioned in the agreement to Marar. As regards the agreement with the assessee Mohammed could not remember as to when he signed the agreement and appeared to doubt his signature in the agreement. He deposed that he was not very sure whether it was his own signature as he did not remember to have signed any such agreement. The ITO was not convinced with the explanation offered by the assessee regarding the source for the advance of Rs. 1,00,000 paid by the assessee, and assessed the same under s. 69 of the IT Act, 1961, in the hands of the assessee. On appeal, the first appellate authority confirmed the addition. On second appeal, the Tribunal in its order dt. 20th Feb., 1991 held that the agreement seized from the residential premises of the assessee clinched the issue and, therefore, the addition of Rs. 1,00,000 was justified under s. 69 of the IT Act. 7. Sri R. Krishna Iyer, the learned Chartered Accountant for the assessee contends that there was no material before the Tribunal to hold that there was sufficient proof that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved against the cancellation of penalty in respect of income from two lorries and income and credits from Archana Jewellery and also in restricting the quantum of penalty to the minimum leviable. The seized materials included two diaries containing notings regarding receipts and expenditure in respect of two lorries, viz., KRF 9956 and KRF 4685. The notings also showed that the assessee had drawn moneys from lorry receipts from time to time. The assessee's contention that the diaries belonged to his uncle's son Sri Raghavan who was residing with him was rejected on the basis of the presumption found in s. 132(4A) of the IT Act. Further, the bank account of the assessee's wife showed certain payments to M/s Sundaram Finance Ltd., in respect of the lorries in the name of Sri Raghavan. Therefore, the lorry business was held to be the benami business of the assessee and income therefrom was included in the hands of the assessee. This was confirmed in appeal. On the above basis penalty was levied. The learned CIT(A) was of the view that though the addition was sustained by the Tribunal the materials before him were not sufficient to warrant penalty under s. 271(1)(c) of the IT Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the quantum appeal, the Tribunal has upheld the inclusion of the income from Archana Jewellery and, therefore, there was no need to depart from that finding in the penalty appeal. The assessee has furnished a copy of the order of the Tribunal dt. 21st Sept., 1993 in ITA No. 401/Coch/88 for the asst. yr. 1979-80 and ITA No. 114/Coch/1991 for the asst. yr. 1980-81. The Tribunal dealt with the issue of penalty on the income from Archana Jewellery from pages 13 to 21 of its order. On an elaborate discussion, the Tribunal held that enquiries were not made with Sri Ramesh or Sri Challappan Achari and an incomplete document did not confer any right on the assessee over the business of Archana Jewellery. At the worst only suspicions can be raised. Further, the Tribunal noticed that the assessment of Sri Chellappan Achary of Archana Jewellery was made only after scrutiny and after the search and upon depositions made by him before the ITO. There were evidence to show that the assessee was only making loans and advances to Sri chellappan Achary to enable him to carry on the business, but that does not mean that the business of Archana Jewellery could belong to the assessee. Confirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of discretion or that the discretion was not exercised judiciously. In the circumstances, we decline to interfere with the direction of the learned CIT(A) to levy minimum penalty on the sums sustained by him. Further, the Tribunal in this order has deleted the penalty sustained by the CIT(A) on the sum of Rs. 1,00,000 being the unexplained investment and has set aside the levy of penalty on another sum of Rs. 1,00,000 in respect of the alleged payment made for purchase of property. Thus, both the items of penalty sustained by the learned CIT(A) stand either deleted or set aside. In the circumstances, the Revenue's grievance about the levy of minimum penalty cannot also survive. For all these reasons, we reject the Revenue's contention. 16. In the appeal of the Revenue for the asst. yr. 1982-83 the only point is against the cancellation of penalty of Rs. 1,25,000 levied under s. 271(1)(c) in respect of the income from Archana Jewellery. 17. The issue has been discussed threadbare in para 13 of our order. There is no fresh material before us to take a different view. In this view of the matter, we uphold the cancellation of penalty and reject the ground of the Revenue. 18. I ..... 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