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TMI Blog2002 (11) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee filed the copies of the confirmation letters from all the creditors. In the assessment proceedings, it appears that the AO recorded the statement of Shri A. Ravikumar who stated that the assessee had given him money which was deposited in the bank and this money was given back to the assessee in the form of cheque. The other creditors, namely, Smt. N. Vijayalaxmi, Smt. A.V. Nagmani were also his relatives and the modus operandi in their case was also similar to that of in the case of Shri A. Ravikumar. In respect of M/s Zubi Investment, the said party could not be located as it had shifted its business to Hyderabad. The AO, in the course of the assessment proceedings, issued letter dt. 26th July, 1997, to the assessee pointing out that Shri A. Ravikumar had given a statement denying the loan transaction and also brought to the notice of the assessee that in respect of M/s Zubi Investment, the identity of the creditor and the genuineness of the loan transaction remained to be proved by the assessee. The AO also specifically brought to the notice of the assessee that in the event of failure on the part of the assessee to show-cause, the amounts will be added to the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sir Shadilal Sugar General Mills Ltd. Anr. vs. CIT (1987) 64 CTR (SC) 199 : (1987) 168 ITR 705 (SC) 4. CIT vs. Ashoka Marketing Ltd. 1976 CTR (SC) 238 : (1976) 103 ITR 543 (SC) 5. CIT vs. Khoday Eswarsa Sons 1972 CTR (SC) 295 : (1972) 83 ITR 369 (SC) The AO has, however, rejected the explanation offered by the assessee. The AO, while levying the penalty on the assessee, relied on the finding in the assessment order. He held that the disclosure made by the assessee was not voluntary and was only after the positive detection by the Department. In levying the penalty, the AO, relied on the decision of the Hon ble Kerala High Court in the case of Calicut Trading Co. vs. CIT (1989) 178 ITR 430 (Ker). The AO also relied on the decision of the Madras High Court in the case of CIT vs. Krishna Co. (1979) 13 CTR (Mad) 24 : (1979) 120 ITR 144 (Mad). 3. Aggrieved by the order of the AO, the assessee preferred appeal to the CIT(A). The CIT(A) held that the basis of addition made by the AO was the statement of one of the creditors recorded during the course of the assessment proceedings. He found that this statement was recorded behind the back of the assessee. He also found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase peace and avoid prolonged litigations. Mere admission for the purpose stated above, will not amount to concealment. In addition to the case laws relied on before the Revenue authorities, he relied on the decision of the Madhya Pradesh High Court in the case of CIT vs. Suresh Chandra Mittal (2000) 158 CTR (MP) 26 : (2000) 241 ITR 124 (MP) and the decision of the Guwahati High Court in the case of Akshya Bhandar vs. CIT (1996) 220 ITR 325 (Gau). 7. We have heard and considered the rival contentions. It is well settled position that findings in the assessment proceedings are not conclusive in the penalty proceedings. The entire set of facts and circumstances has to be reviewed by the AO in penalty proceedings. The initial burden of proof however, would be on the assessee in view of Expln. 1 to s. 271(1)(c). The fact that the assessee agreed to the addition at the time of assessment on the condition that he would not be visitied with penalty proceedings would not be an obstacle while imposing penalty. This is because, the AO has no authority to waive penalty. Any such promise by the Revenue would also not amount to as there cannot be estoppel against the statute. The decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is statement that the money represented the assessee s money is a vital factor which will go against the assessee. The assessee was well aware of the fact that if the creditor is not cross-examined, his statement will be used by the AO against the assessee. The assessee thus had sufficient opportunity to prove his case in the assessment proceedings but did not choose to do so. In the penalty proceedings, the assessee did not make any efforts to prove that the explanation offered by him, namely, that he is offering the credits as his income only with a view to purchase peace and considering the fact that if the creditors are cross-examined, he will not be in a position to get the fresh credits in the market. In the light of the clear statement of the creditor that the credit represented the money belonging to the assessee, the onus was greater on the assessee to show that the explanation offered by him was bona fide. In the facts and circumstances, it has to be necessarily concluded that the offer by the assessee was only after a positive detection by the Department. It has to be noticed that the Hon ble Kerala High Court in the case of CIT vs. Calicut Trading Co. had an occasion to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion that the amount does represent the assessee s income. It is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was animus, i.e., conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. Where the circumstances do not lead to the reasonable and positive inference that the assessee s explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. Absence of proof acceptable to the Department cannot be equated with fraud or wilful default. On the state of accounts and evidence in the quantum proceedings, the Department was justified in treating the cash credits as income of the assessee but merely on that basis by recourse to Expln. 1, penalty under s. 271(1)(c) could not have been imposed without the Department making any other effort to come to a conclusion that the cash credits could in no circumstances would have been amounts received as temporary loans from vario ..... X X X X Extracts X X X X X X X X Extracts X X X X
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