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TMI Blog1988 (2) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... course of hearing he further produced another letter dated 10th March, 1978. During the course of assessment proceedings the ITO noted that the deceased-assessee had invested an amount of Rs. 2,70,000 in three bank deposits on 28-12-1974. When asked to explain the source of investment of that amount by the deceased-assessee the appellant relied upon the documents produced by him as mentioned above and contended that the deceased-assessee along with his sons, wife, two daughters-in-law and one daughter had stayed at Kampala in Uganda (East Africa) for a very long time and there in Uganda the ladies of the family viz. Smt. Surajben, wife of the deceased-assessee, Smt. Shardaben, wife of the appellant, Smt. Sushilaben, wife of Kantilal M. Patel, another son of the deceased-assessee, and Smt. Meenaben, daughter of the deceased had by working on sewing machines produced their own incomes which they had invested in purchasing gold ornaments. On their return from East Africa the ladies had brought their gold ornaments with them and had kept them with the deceased-assessee. The deceased-assessee along with his sons was a partner in M/s. Mahendra Metal Industries but sometimes in December 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad. It appears that during the pendency of these two appeals the will alleged to have been executed by the deceased on 2nd July, 1975 was required to be re-examined by the ITO in order to find out the genuineness of the signatures of the deceased on the said documents. On making a comparison of the signatures of the deceased on the will deed with his signature on the documents filed in City Civil Suit No. 3084 of 1974 the ITO felt satisfied that the signatures on the will were those of the deceased-assessee. The learned CIT(A), on the basis of the report of the ITO, treated the will of the deceased as a genuine document and allowed both the appeals. 6. The matter however came up before the Tribunal in the appeals preferred by the three ladies mentioned above against the order of the AAC and the appeals preferred by the department against the order passed by the CIT(A) in the cases of the deceased-assessee through the present appellant and of Smt. Surajben, the widow of the deceased. The Tribunal held that the assessee had signally failed to prove the source of the deposits. It therefore reversed the order of the CIT(A) as passed in the cases of the deceased-assessee and his wido ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal had declined a reference also. The learned CIT(A) thus dismissed appellant's appeal. Hence this appeal before us. 9. Mr. J.P. Shah, the learned counsel for the assessee has assailed the order under appeal on legal aspects as well as on merits. On legal aspects of the penalty order as passed by the ITO and as confirmed by the CIT(A) in appeal in the present case Mr. Shah submitted that by the use of both the conjunctions 'and/or' it is abundantly clear that the ITO had failed to come to a definite conclusion with regard to the act of the assessee attracting penal provisions in the present case. Mr. Shah explained that the ITO has failed to point out as to whether it was a case of concealment of particulars of income or whether it was a case of furnishing inaccurate particulars of such income. Mr. Shah further submitted that in a case where the ITO could not arrive at a definite conclusion on the point as to whether penalty was imposable for concealment of the particulars of the income or for furnishing inaccurate particulars of such income penalty u/s. 271(1)(c) of the Act cannot be levied. In this respect Mr. Shah invited our attention to the part of ITO's order as has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether he is going to impose penalty for concealment of the particulars of income of the assessee or for his failure to furnish correct/accurate particulars of such income. There is no doubt that by issuing a notice u/s. 274 of the Act the ITO may require the assessee to explain both the fact situations mentioned above. But in order to impose penalty under clause (c) of sec. 271(1) the ITO shall have to record a definite finding as to whether he had found a case of concealment of particulars of income or a case of furnishing inaccurate particulars of such income. He cannot impose penalty on an assessee for both of the fact situations at one and the same time. 11. In the present case we have extracted the relevant part of ITO's order in extenso. It is clear that at the time of imposition of penalty upon the assessee the ITO could not record a clear finding as to whether he intended to impose penalty for concealment of particulars of income of the assessee or for furnishing inaccurate particulars of such income. That being the position of the penalty order passed in this case there is no escape from the conclusion that the principle laid down by the Gujarat High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Sea Customs Act, 1978 (Act 8 of 1978) and submitted that jewellery not exceeding Rs. 5,000 in value being brought by a passenger as his personal effect was not required to be subjected to customs duties and therefore the ladies could have very well brought the gold ornaments with them at the times of their repeated visits to India from East Africa during the period of their stay abroad. Mr. Shah also invited our attention to various papers on the paper book showing the remittance of Rs. 1,82,500 by the members of the family of the deceased to India. It was thus submitted that though the burden of proving the conditions attracting penalty u/s. 271(1)(c) of the Act was there on the shoulder of the revenue yet the appellant had by cogent and convincing evidence positively proved that the concealment of income amounting to Rs. 2,72,000 had not resulted from any fraud or gross or wilful neglect on the part of the appellant and therefore no penalty was imposable upon him. In support of his arguments Mr. Shah heavily relied upon the Gujarat High Court decision in the case of CIT v. Vinaychand Harilal [1979] 120 ITR 752. 13. In reply Mr. Khandelwal vehemently stressed that the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legal presumptions created by the Explanation are however rebuttable and an assessee can successfully prove, by leading some affirmative evidence or by relying on the material on record that there was no fraud or gross or wilful neglect on his part to return the correct income. In that view of the matter the proposition laid down by the Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696 that the burden of proof squarely lies on the department will not apply to a case u/s. 271(1)(c) after coming into force of the Explanation thereto with effect from 1-4-1976, if Explanation is applicable to such a case. In our approach to the present case one more factor shall have to be kept in mind. Herein it cannot be lost sight of that it was not that assessee himself whose income was to be assessed, had filed the return. It was one of his legal heirs and representative who was obliged to file the return of income of the deceased-assessee due to his death. It is in the light of these principles that we intend to approach the facts of the present case and to see whether the appellant had succeeded in proving that there was no fraud or gross or wilful neglect on his part in not ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proach the Court. It is gathered from the documents placed before us that perhaps the deceased had felt much interested in his younger son with whom he was staying in a bungalow in Rajan Society and whom he wanted to establish in another business to be started under the name of Patel Metal Industries. Anyway the facts relevant to the investment of Rs. 2,70,000 by the deceased in three fixed deposits with Central Bank of India, Mithakali branch on 28th December, 1976 are that the females had allegedly left their jewelleries with the deceased on safety considerations. It is alleged that it was sometime in December 1974 that the deceased had sold such jewelleries and had deposited the proceeds thereof in three bank deposits in the joint names of himself and his wife Smt. Surajben. The ITO rejected this version on the ground that neither the acquisition of gold ornaments by the ladies was successfully proved nor the sale thereof. He found certain discrepancies in the statements of the ladies and doubted whether they could have brought gold in huge quantity from abroad without undergoing the rigours of Customs Act. He further disbelieved that the ladies would have given their ornaments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment proceedings or if taken, that had been found unfounded, baseless or even false. Findings recorded in quantum proceedings are not to operate as res judicata in penalty proceedings. The plea advanced by the assessee and material relied upon by him in penalty proceedings shall have to be examined with a view to see whether such a plea and material can reasonably be declared as sufficient to discharge the burden of the assessee under the Explanation. We need not stress that findings on that point shall have to be recorded on the basis of preponderance of probabilities as in civil matters and not on the standard of proof beyond doubt, as in criminal proceedings. In the present case we find that the appellant had throughout been asserting two vital facts, viz. (1) that the moneys invested in the fixed deposits did in fact belong to certain females of the family, and (2) that it all had come to his knowledge after the death of the deceased. This conduct of the appellant was strengthened by the fact that at the very first hearing he had not only disclosed all the relevant facts by his letter dated 15th February, 1978 but had also placed all the relevant material in his p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a property left by their father. This again indicates that assertion being advanced by the appellant was not without any basis. 17. Then again it cannot also be lost sight of that at one stage of the proceedings the tax authorities themselves had upheld the contention of the appellant that the distribution of the moneys in the fixed deposits in question had resulted in bringing capital gain to the ladies of the family for which they had been taxed accordingly. No doubt this position was unsettled by the Tribunal in appeal yet it leaves much for consideration whether such circumstances would necessarily go to prove mala fides on the part of the appellant. 18. Thus having considered the material on record, the conduct of the appellant exhibited in the course of assessment proceedings as also in the course of penalty proceedings, the treatment given to the amount in question by the department at several stages of proceedings in the case of several persons we are clearly of the opinion that the appellant in the present case had fully proved that there had been no fraud or gross or wilful neglect on his part in not disclosing the correct income of the deceased in the return fil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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