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TMI Blog1978 (7) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty. It seems the assessee gave no reply. The ITO observed that in view of the above facts, he was convinced that the assessee committed wilful concealment and levied a penalty of Rs. 9,300. In the asst. yr. 1971-72, the assessee returned a loss of Rs. 216. The Income as finally assessed by the Tribunal included a sum of Rs. 13,900 being the unexplained investments of the assessee. The details are, purchase of land Rs. 13,500, remodelling of the house Rs. 2,000 and cost of construction of the 1st floor of Kesharganj house Rs. 2,500 totalling to Rs. 18,000. Giving a set off of Rs. 4,100 being the sale proceeds of the land, the balance of Rs. 13,900 was assessed as unexplained investment for this assessment year. Here also the ITO started penalty proceedings and in the absence of any explanation from the assessee, held the assessee to be liable for penalty under s. 271(1)(c) of the Act and imposed a sum of Rs. 13,900 as the penalty under that section. 3. The assessee appealed to the AAC and raised several contentions challenging the justification of the penalties imposed. It was urged that no proper opportunity to explain was given to the assessee in the course of the pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a member of the Hindu Undivided Family but not on the Karta for some reason or the other, the second notice also could not be complied with by the assessee-family as they did not realise the serious consequences which might follow from its non-compliance. He urged that in spite of the above, the ITO should have appreciated the facts already on record and should have come to a judicious conclusion instead of the summary manner in which he imposed the heavy penalties. He drew our attention to the explanation regarding the source of the funds given at the time of assessment proceedings by the assessee. He explained that the assessee-family was living in a rural area and was not having much expenses. They were carrying on their business for several years past. Again they had agricultural income. The investments under consideration were nothing but a house which was constructed after demolishing the earlier house owned by it; a jeep was purchased and the house was remodelled and another floor was built on the same in course of time. His point was that the investments were not so large as to be incommensurate with the known sources of income of the assessee family. He contended that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation to s. 271(1)(c) applies to the facts of this case. Consequently, it was for the assessee to show that the difference between the returned income and the assessed income did not arise out of any fraud or gross or wilful neglect on its part. We find that in the case of Commissioner of Income Tax, Orissa vs. K.C. Behera and Others(1), the penalty under s. 271(1)(c) imposed after the Explanation thereto came into force was cancelled by the Tribunal by applying the law as it stood prior to the coming into force of the said Explanation. It was decided that the date of accrual of the cause of action is the date of satisfaction and the date of satisfaction of the ITO to start the penalty proceedings is the crucial date for the application of relevant law. Hence, the penalty could not be cancelled by ignoring the Explanation which came into force after the satisfaction of the ITO to start the penalty proceedings in that case. Again, we find that in the case of Ganpatrai Gajanand(2), the issue raised was as to whether the Tribunal was right in requiring the Revenue to prove that the amount added under s. 68 of the IT Act was in fact the income of the assessee before imposing a pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er words, a penalty cannot be imposed automatically or mechanically after an addition has been made under s. 68 or 69 of the Act. Even the material on which the said additions were made have to be again given a fresh look from the point of view of levying penalty which is not the same as making those additions. A certain item may be assessed as the assessee's income if its source could not be explained satisfactorily. A thing may be said to be not satisfactorily explained for a number of reasons, for example, lack of supporting evidence. But that would not lead to the conclusion that the explanation was improbable which is the requirement for imposing the penalty. Bearing the above principles in mind, we now proceed to examine the facts of this case. The assessee was earning income from business and agriculture for several years. This fact has not been disputed. It made some investments in constructing a house and acquiring some assets. It did not maintain any records showing the exact income earned and the amount saved therefrom year after year. Nor was there any record relating to the exact amount invested by it in the aforesaid assets. In our opinion, there is nothing strange fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e imposition of penalty and no longer within the special knowledge of the assessee. The case of Ganapatrai Gajanand was concerned with a different issue viz. Whether the Revenue should prove that the amount deemed to be income under section 68 should be shown to be really the income of the assessee for purposes of levying penalty after coming into force of the Explanation to s. 271(1)(c) of the Act. We are not concerned with that issue in the instant case. 8. The question that finally emerges in this case is as to whether the assessee discharged the initial onus that lay on it under the Explanation to s. 271(1)(c) of the Act. It is true that the assessee did not respond to the show cause notice given by the ITO in the course of penalty proceedings. But it is also true that very relevant materials were already on record before the ITO having a direct bearing on the issue that was to be decided judiciously by him. The ITO did not take into account the status and the back-ground of the assessee. He did not consider the fact that the additions were made on the basis of estimated and that too partly accepting the explanation and partly disbelieving the explanation. Considering all th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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