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TMI Blog1977 (3) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... aid pocket note book for the inspection of the ITO. In the circumstances, the ITO held that the assessee was carrying on money-lending business outside the books of account and he worked back the capital as on 31st Jan., 1970 at Rs. 1,68,920 by adopting the interest rate of 18 per cent. The ITO held that the entire capital of the assessee in regard to money-lending transactions as on 31st March, 1970 of Rs. 1,68,920 should be treated as income of the assessee under s. 69 of the Act. When the matter was take on appeal, the AAC reduced the addition made under s. 69 to Rs. 90,550. On further appeal to the Tribunal, the entire addition of Rs. 1,68,920 was deleted as it was held that there was no proof that the assessee had advanced loans to this extent during the year of account. However the Tribunal considered that the assessee had carried on money-lending transactions estimated the regular books of account and the income from such transactions was estimated at Rs. 35,000. The ITO in the course of the assessment proceedings issued notice to the assessee for concealment of income under s. 271(1)(c) of the Act and the matter was referred to the IAC under s. 274(2) of the Act. In respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the money lending transactions. In view of this, it was argued that it has to be assumed that the penalty proceedings which he initiated could not be with reference to the income which the assessee might have earned. In view of the fact that the Tribunal had deleted the entire addition made by the ITO under s. 69 of the Act, it was submitted that the IAC had no jurisdiction to levy any penalty for concealment of any income from the said money-lending transactions. 4. It was further submitted by the learned counsel for the assessee that the ITO at no stage had issued any notice under s. 143(2) (or 142(1) of the Act requiring the assessee to produce the alleged note book on which much reliance has been sought to be placed by the IAC. If the ITO believed that the assessee was, in fact carrying on money-lending transactions outside the books of account, it would have been obligatory on his part to have issued a specific notice under s. 142(1) (or 143(2) requiring the assessee to produce the alleged note book and on failure to produce the same, he would have been entitled to complete the assessment under s. 144 of the Act estimating therein the income that the assessee might have ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions. Being so, it was submitted that the Tribunal did not, in fact, delete the entire addition on this account, but sustained the addition to the extent of Rs. 35,000, being the estimated income from the money-lending transactions. Our attention was specifically drawn to the decision of the Tribunal for this year where it has been held that the assessee-firm was carrying on some clandestine money-lending transactions outside the regular books of account. This observation of the Tribunal, it was argued, would prove substantially the fraud committed by the assessee and also the dishonest methods employed by the non-production of the original pocket note book. The fact that the assessee was carrying on money-lending business cannot at this stage be disputed as the Tribunal which is the final fact finding authority has given a finding to this effect. In the absence of the original pocket note book, it was argued that there is no alternative but estimate the income from this source and on this ground the Tribunal had estimated the income form this source at Rs. 35,000. Taking all the facts into account, it was submitted that this is a clear case of concealment under the main provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 69 has been specifically enacted to bring into the net of taxation the investments which cannot be explained by the assessee as the income for the year. In view of this, the addition made by the ITO to the tune of Rs. 1,68,920 on account of unexplained investments cannot include any income which the assessee might have earned on account of money-lending transactions. 7. We find that the entire addition made by the ITO under s. 69 was deleted by the Tribunal and the income form money-lending transactions outside the books of account was estimated at Rs. 35,000. We do not agree with the learned Departmental Representative that the addition made by the ITO under s. 69 also included the income from money-lending business. The ITO, having made the addition only on account of unexplained investments, the satisfaction obtained by him for the issue of notice on account of concealment of income can only be with respect to the aforesaid addition. However, we find that the entire addition made on account of unexplained investments was completely deleted by the Tribunal and the IAC, while levying penalty under s. 271(1)(c) of the Act, has clearly mentioned that the proceedings before him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (1)(c) of the Act on the ground that the assessee had deliberately furnished inaccurate particulars of his income. On appeal, the Tribunal held that the order of penalty of the IAC for concealment was without jurisdiction as the jurisdiction of the IAC was restricted to those items of concealment of income in regard to which the ITO was satisfied that there was concealment of income. On reference to the High Court, it was held that the conclusion reached by the Tribunal that the IAC had no jurisdiction to impose a penalty under s. 271(1)(c) for concealment of income was correct. 8. In the case of CIT vs. Shadiram Balmukand(4) the Allahabad High Court was concerned with a case where the ITO included in the total income of the assessee certain cash credits as income form undisclosed sources and issued notice under s. 28 of the 1922 Act for imposing a penalty. While considering the appeal preferred by the assessee, the AAC detected further cash credits and increased the amount of undisclosed income. The ITO then passed an order imposing a penalty taking into account not only the cash credits found by him but also the cash credits discovered subsequently by the AAC in appeal. Upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the onus was clearly on the Department to prove whether, in fact, the assessee earned any income on account of such transactions. Having not done so, the change of concealment of income could not be levelled against the assessee. Hence even on merits of the case we hold that penalty would not be leviable under s.271(1)(c) of the Act for concealment of income. 10. Regarding the applicability of the Explanation to s. 271 (1)(c) of the Act, the question that arises for consideration is whether the onus that has been cast on the assessee has been discharged or not. As explained earlier, the ITO was in possession of full details of most of the parties with whom the assessee was having money-lending transactions. Being so, it cannot be held that the assessee wilfully withheld and information from the Department. In this view of the matter, we hold that there has not been any fraud or neglect on the part of the assessee as contemplated under the explanation to s. 271(1)(c) of the Act. In view of the what is discussed above, we hold that no penalty would be leviable even under the Explanation to s. 271(1)(c) of the Act. 11. In the result, the order levying penalty passed by the IAC i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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