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TMI Blog2006 (10) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ppearing in the name of Master Manish Matlani, Rs. 78,000 appearing in the name of Master Hitesh Matlani and Rs. 61,000 appearing in the name of Master Lucky Matlani were noticed by the assessing authority. He proposed addition of the aforesaid amounts under section 68 of the Act. The applicant gave the explanation that all the three depositors who were minors have been regularly assessed to tax with the Income-tax Officer, Ward-II(VII), Kanpur, and were maintaining savings bank account with the Indian Overseas Bank, Swarup Nagar Branch, Kanpur. The applicability of the provisions of section 68 of the Act was also challenged on the ground that the income had already been assessed in the hands of the minors and that the deposits have come from their savings bank account through cheques. The genuineness of the cash credit as well as the capacity to give money/loan stands established. The assessing authority after examining the explanation and the documents filed by the applicant in the assessment proceedings came to the conclusion that all the three minors are grand sons of Sri Nainu Mal Matlani who is a partner of the firm and are closely related to the partners. The father of Maste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant-firm showed opening credit balance of Rs. 8,000 and further credit of Rs. 25,000 on June 21, 1988, and Rs. 1,000 on July 1, 1988, and the entire amount was squared up on October 1, 1988. The explanation furnished was the same as in the case of Master Lucky Matlani, Sri Ram Chandra Matlani, the father of Master Manish Matlani, was examined under section 131 of the Act and he gave the similar explanation. The copy of the savings bank account of Master Manish Matlani was also examined by the Income-tax Officer who found that Rs. 25,000 was deposited on June 21, 1988, in the bank which is the same date on which the amount was credited by the applicant in its books of account. He came to the conclusion that the firm' s profit had been routed through the minor' s bank account. In respect of the deposits appearing in the name of Master Hitesh Matlani, the position was no different. The assessing authority added a sum of Rs. 1,65,000 towards unexplained cash credits under section 68 of the Act. The additions have been upheld up to the stage of the Tribunal. The Income-tax Officer while passing the assessment order, also directed for initiation of penalty proceedings un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order itself the assessing authority had mentioned for initiating penalty proceedings under section 271(1)(c) of the Act for concealment of particulars of income which itself establishes that the Income-tax Officer was satisfied that in the present case penalty proceedings for concealment of particulars of income has to be initiated. According to him, no particular form of recording satisfaction has been mentioned under the Act and, therefore, recording of the fact to initiate penalty proceedings during the course of the assessment proceedings would itself mean that the assessing authority was satisfied that the applicant had concealed the particulars of his income and penalty proceedings have to be initiated. He further submitted that the explanation offered by the applicant had rightly been disbelieved by all the authorities including the Tribunal on valid and cogent reasons. He submitted that Explanation 1 to section 271(1)(c) of the Act clearly applies in the present case as the explanation offered by the applicant has been found to be false by all the authorities. Thus, the penalty has rightly been imposed. He has relied upon a decision of the apex court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the Income-tax Officer during the assessment proceedings that the assessee had concealed the particulars of his income or had furnished incorrect particulars of such income. What is contem plated by clause (1) of section 271 is that the Income-tax Officer or the Appellate Assistant Commissioner should have been satisfied in the course of proceedings under the Act regarding matters mentioned in the clauses of that sub-section. It is not, however, essential that notice to the person proceeded against should have also been issued during the course of the assessment proceedings. Satisfaction in the very nature of things precedes the issue of notice and it would not be correct to equate the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner with the actual issue of notice. The issue of notice is a consequence of the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner and it would, in our opinion, be sufficient compliance with the provisions of the statute if the Income-tax Officer or the Appellate Assistant Commissioner is satisfied about the matters referred to in clauses (a) to (c) of sub-section (1) of section 271 during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the old Act corresponding to section 271 of the new Act depends upon the satisfaction of the Income-tax Officer in the course of the proceedings under the Act. It cannot be exercised if he is not satisfied and has not recorded his satisfaction about the existence of the conditions specified in clauses (a), (b) and (c) before the proceedings are concluded. There is no evidence on record to show that the Income-tax Officer, in this case, was satisfied in the course of the assessment proceedings. Therefore, we must hold that the penal provisions of section 271(1)(c) were not attracted in this case." 14. The aforesaid decision is clearly distinguishable for the reason that in the present case during the course of the assessment proceeding the Income-tax Officer has mentioned for initiating penalty proceedings under section 271(1)(c) of the Act for concealment of the particulars of income. 15. In the case of Eastern Commercial Enterprises [1994] 210 ITR 103, the Calcutta High Court has held that it is trite law that cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material or circumstances leading to the reasonable 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 has no bearing on factor No. 1 but it has a bearing only on factor No. 2 ; the explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee ; no penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does ; if an assessee gives an explanation which is unproved but not disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee' s case is false, the explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee ; alternatively, treating the explanation as dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiate and levy penalty is clearly not recorded as enjoined by law. The above jurisdictional defect in our view cannot be cured. Accordingly, we hold that penalty imposed is not valid and jurisdiction to impose the same was illegally assumed without recording a proper satisfaction. Penalty imposed is cancelled for the above reasons." 20. The aforesaid decision is of no help to the applicant inasmuch as in the present case we find that in the assessment order the assessing authority had recorded a clear finding that the profits of the firm had been diverted through the deposits in question and a case of concealment has been made out. 21. So far as the two decisions of the Delhi High Court are concerned, we find that under the provisions of the Act, the Income-tax Officer is not required to record his satisfaction in a particular manner or reduce it in writing. It can be gathered from the assessment order itself. In D. M. Manasvi [1972] 86 ITR 557, the apex court has clearly held that the Income-tax Officer should be satisfied during the course of the assessment proceedings that the assessee had concealed his particulars of income or has furnished inaccurate particulars of such inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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