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TMI Blog1984 (4) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the assessee before the ITO that it was the sister concern of M/s Ganesh School Book Deport Which also had a branch called Ganesh Paper Agency, both located in Faizabad. It was explained that goods worth Rs. 80,000 belonging to Ganesh Paper Agency had also been hypothecated with the bank. It was stated vide letter 14th Feb., 1979, written by the assessee to the ITO that that the closing stock on the relevant date with Ganesh Paper Agency was of Rs. 5,19,426. It was also explained to him that the stock has actually hypothecated with the bank and the lock and key to the godown remained either with the assessee or Genesh Paper Agency, the Bank having no physical control over it. The explanation was rejected by the ITO as in his opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Court also observed that even assuming that such a practice existed, the Tribunal was not expected to take judicial notice of such substandard morality on the part of the assessee so as to enable them to go back on their own sworn statement given to the banks as to the stocks held and hypothecated by them to the banks. 5. The ITO also initiated penalty proceedings under s. 271(1)(c) of IT At, 1961. After relying on the finding of the Tribunal referred, to above, and after referring to the Explanation-I to s. 271(1)(c), as substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st April, 1976, he imposed the penalty of Rs. 60,00 which was confirmed by the CIT (A). 6. The assessee is now in appeal before us. We have heard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee firm, on the other hand, consists of two partners, namely Smt. Punam Agarwal and Sri Onkar Agarwal, who are respectively wife and son of Shri Gopal Agarwal and Shri R. S. Agarwal. Each of them holds 50% share. This relationship, therefore, does no rule out the possibility of utilising the stocks of Ganesh School Book Deport by the assessee with a view to seek an overdraft limit from the bank. The certificate dt. 20th Dec., 1979 under the signature of Shri R. S. Agarwal, issued by Ganesh School Book Depot has not either been proved false or inaccurate in any respect. The CIT (A), while dealing with the quantum matter, has merely stated that it was vague and that no particular of stock had been furnished. We also do not agree with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o as to take support from the decision of Madras High Court reported in (1974) 95 ITR 375 (Mad). 7. The addition has obviously been made under s. 69A or s. 69B Act. To apply these sections, it is necessary that the assessee should be found either the owner of the stock or should have been found having made the investments in the extra stocks. The burden of proving the ownership or the making of the investment by the assessee rests on the Department. This principle is now well settled by the Bombay High Court in the case of J. S. Parkar vs. V. B. Palekar & Ors. (1974) 94 ITR 616 (Bom). It was held in this case that the burden of proving that an investment had, in fact, been made (and not recorded in the books) and/or that the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the Department, it is not able to substantiate. The proviso to the above Explanation states that nothing contained in the Explanation shall apply to a case referred to in cl. (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation if bona fide all the facts relating to the same and material to the computation of his total income had been furnished by him. In the present case, we do not find anything on the record to doubt the bona fide of the assessee is stating that goods worth Rs. 80,000 belonging to its sister concern had also been pledged with the bank. Similarly, we do not find that any fact or material to the computation of assessee's total ..... X X X X Extracts X X X X X X X X Extracts X X X X
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