9911796707
TMI Blog1978 (7) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly completed the assessment by order passed on 5th Sept., 1973 adding the sum of Rs. 24,000 as the income the assessee from "other sources". The ITO, however, initiated penalty proceedings for concealment of income in respect of the above credits. The assessee replied on 18th Feb., 1974 to the show cause notice issued by the ITO stating that the credits represented borrowals from Maddipati Durga Rao and that the same were repaid during the same year, that the creditor Durga Rao owned substantial agricultural and other properties, but he refused to confirm the borrowals for reasons best known to him and that in these circumstances the assessee surrendered the above sum of Rs. 24,000 for assessment under a bona fide belief that no penal proceedings would be taken for concealment. It was also pointed out that there was no material to show that the above sum represented the concealed income of the assessee. He also filed another letter dt. 20th Feb., 1974 referring to certain decisions of Courts in support of his submissions. The ITO rejected the assessee's explanation. He further observed that the creditor when contacted denied the advance of loans to the assessee. He held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, held that the penalty in this case has to be sustained on the basis of the Expln. to s. 271(1)(c) and that the assessee has not discharged that onus cast on it under the Explanation. He observed that the assessee did not produce any documentary evidence in support of the cash credits, that for the use of the above sum of Rs. 24, 000 for about ten months till it was stated to have been repaid on 28th March, 1972 the assessee firm had not paid any interest, that but for these credits on the relevant dates there would be adverse cash position in the day-books of the assessee firm, that the ITO had made enquiries and the creditor had denied having advanced any money to the assessee firm and that in these circumstances it cannot be stated that the assessee had introduced in its books the credits genuinely obtained from Durga Rao. He further observed that it is probable that the credits could well be bogus. He concluded by saying that he was of the opinion that the assessee had failed to discharge the burden case on it under the Expln. to s. 271 (1)(c). In this view of the matter he upheld the penalty. Against this order of the AAC the present appeal is filed by the assessee befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corroborate the cash credits. The assessee is neither guilty of concealment of income nor guilty of furnishing inaccurate particulars or of fraud or of grass or wilful neglect on its part. He, therefore, strongly urged that the penalty levied should be concealed. He referred to the following rulings in support of his stand: 1. Gumani Ram Siri Ram vs. CIT, Punjab,(2) 2. Commissioner of IT, Andhra Pradesh vs. C.V.C. Mining Company, Gudur,(3) 3. Addl. Commissoner of IT, Lucknow vs. Kishan Singh Chand,(1) 4. Commissioner of IT, U.P. vs. Mansa Ram and Sons,(4) 5. D. Halappa Sons vs. Commissioner of IT, Bangalore(5), wherein the High Court held that even in a case where the assessee conceded that minimum penalty may be imposed penalty should not be imposed without proof of concealment of income. On behalf of the Department the learned Departmental Representative relied heavily on the orders of the authorities below. He stressed that the Expln. to s. 271(1)(c) squarely applied to this case. He pointed to that the creditor had denied having advanced loans to the assessee and therefore the assessee's explanation is proved to be false. He also pointed out that but for the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief the not penal proceedings would be taken for concealment. The assessee had submitted this in its written reply dt. 18th Feb., 1974. The ITO had, however, levied the penalty by order dt. 25th March, 1976. There is no finding by the ITO that there is no foundation for such a Bona fide belief by the assessee. On the other hand the ITO has referred to a letter dt. 3rd May, 1974 addressed not to the assessee firm but to a partner wherein reference was made to the contacting of the alleged creditor Durga Rao by the Department, from which it became clear that Durga Rao did not lend any money to the assessee firm. We have perused a copy of the said letter produced before us by the learned departmental representative. That letter was addressed by the ITO to partner Shri Jagannatha Rao. The reference to the contacting of Durga Rao is stated in the following words in that letter: "Shri Durga Rao has been contacted. He clearly mentioned that he never lent to or deposited any amounts with the firm. From this it is clear beyond doubt that you have brought in some secreted moneys into the book of the firm in the guise of cash credits which are not genuine". By this letter the partner was cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to prove the genuiness of the credits on 16th Aug., 1973. The as had consistently pleaded that due to the fact that Shri Durga Rao declined to confirm the cash credits, the assessee came forward to surrender the cash credits for assessment on theunderstanding and Bona fide belief that penal proceedings would not be taken. Such an inference of the understanding with the Department can be drawn from the facts of the case has been accepted by the AAC and this finding need not be interfered with. For reasons best known to Durga Rao, he denied to confirm the cash credits. There is no acceptable material on record to show that the cash credits are false as contended by the Department. We have perused the statement said to have been taken by the Inspector of the Department from Shri Durga Rao, which we have referred to above. A perusal of the same does not persuade us to hold that he ha s categorically denied having advanced the sum of Rs. 24,000 to the assessee firm. When the creditor has declined to confirm the credit the assessee was faceted with no alternative but to offer the same for assessment for purchasing peace with the Department. The assessee had in fact said so in the let ..... X X X X Extracts X X X X X X X X Extracts X X X X
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