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TMI Blog1989 (7) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. The reference application made under s. 256(1) of the Act was thus rejected. Thereafter, the Hon'ble High Court issued a mandamus in Income-tax Case No. 109 of 1976 by Judgment dt. 22nd Aug., 1977 on an application by the Revenue under s. 256(2) of the IT Act, 1961, to the Tribunal to refer the following question of opinion of the High Court. "Whether, on the facts and in the circumstances, the Tribunal is correct in cancelling the penalty of Rs. 1,76,000 levied under s. 271(1)(c) of the IT Act, 1961"? 3. The Tribunal submitted statement of the case bearing R.A. No. 6(ASR)/79-77 dt. 18th March, 1978 arising out of Tribunal's order in ITA No. 237 (ASR)/75-76. 4. The Hon'ble High Court in IT Ref. No. 6 of 1978 by Judgment dt. 23rd Jan., 1986 has held that the Tribunal decided the appeal, on the basis of law which was applicable before the aforesaid amendment. The reference to this amendment by the Hon'ble Court is with regard to the amendment made, "by the Finance Act No. 5 of 1964". The Hon'ble Court has pointed out that the Full Bench of the Court in the case of Vishwakarma Industries vs. CIT (1982) 29 CTR (P&H) 243 (FB) : (1982) 135 ITR 652 (P&H) (FB) has overruled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication was accepted by the ITO and the assessment made on 5th June, 1971 under s. 144 was cancelled. Thereafter, the assessee filed the return of income on 21st June, 1971 declaring an income of Rs. 3,850 with the following remarks in part IV of the return of income: "1. Since the status of the assessee is resident but not ordinary resident, no outside income has been shown as not derived from business controlled in India. 2. A sum of Rs. 6,04,500 seized by the Enforcement Officer on 17th March, 1971 does not belong to assessee and at any rate it is not income of the assessee. 3. Income from agricultural land is exempt from tax." The above return was, however, revised by the assessee on the 5th July, 1971 declaring an income of Rs. 8,350. In this revised return, the assessee declared a short-term capital gain of Rs. 4,500 from the sale of a shop at Chandigarh in addition to the income from house property at Rs. 3,850 originally declared. 6. When the search at his residential house took place on 17th March, 1971, the assessee was not present therein and his statement as such was not recorded at that time. Later on, the ITO examined the assessee about the source of Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence to prove the contentions made by the assessee regarding the source of acquisition of the sum of Rs. 6 lakhs. 8. However, during the course of assessment proceedings, the assessee produced all the persons from whom the sum of Rs. 6 lakhs was obtained as recorded supra. The ITO examined each one of these parties and recorded their statements. He, however, held that the assessee's contention that the sum of Rs. 6 lakhs was collected from these parties in cash with the object of purchasing shares of Kartar Bus Service Ltd., Jullundur was not acceptable. He accordingly treated the sum of Rs. 6 lakhs as income from undisclosed sources under s. 69A of the IT Act, 1961. 9. In addition to the sum of Rs. 6 lakhs added to the total income of the assessee on the above basis, the ITO also included the following amount to the total income of the assessee: . . Rs. (i) Loan from his father Shri Niranjan Singh 14,000 (iii Income from agricultural land 8,000 (iii) Loan from Shri Harcharan Singh 10,000 10. The ITO also initiated penalty proceedings under s. 271(1)(c) of the IT Act, 1961 and referred the case to the IAC under s. 274(2) of the Act. 11. Against the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no cash balance. The ITO also noticed that Bahia Industries was a petty concern and its daily sales were only in hundreds. He also found from the entries made on 16th March, 1971, 11th March, 1971, 13th March, 1971, 15th March, 1971 and 16th March, 1971 that the firm entered cash sales in round figures which were quite different from those of their entries made on these dates. The ITO also noticed that the totals written at the end of each date were disturbed and these appeared clear overwritings in the thousand digits. The ITO, therefore, was of the opinion that the entries made in the cash book of Sahia Industries were clearly interpolated in order to create sufficient cash balance for the purpose of showing the withdrawal of Rs. 25,000 on 16th march, 1971. The ITO also obtained the opinion of the Forensic Laboratory. In their report, the Forensic Science Laboratory observed that the relevant cash book entries of the firm Sahia Industries, Phagwara were clearly interpolated. The ITO, therefore, held that the alleged advance of Rs. 25,000 given by Shri Lembar Singh was not a genuine advance. This finding of the ITO has been upheld by the AAC. We have gone through their recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the land in October/November, 1970 in purchase of land on 14th June, 1971, Shri Rachhpal Singh was not in a position to possess a sum of Rs. 50,000 for being advanced to the assessee on 16th March, 1971 as alleged. On the basis of the above facts, the ITO did not accept the advance in the name Shri Rachhpal Singh as genuine and added back the amount towards the total income of the assessee. This finding of the ITO was also upheld in appeal by the AAC. We have gone through the statement of Shri Rachhpal Sigh and the evidence brought on record by the ITO. It is abundantly clear from the record that Shri Rachhpal Singh had neither sold the land in question nor did he purchase land subsequently. The land in question belonged to Smt. Amar Kaur and she alone sold the land in October/November, 1971. There is no evidence on record to show that Shri Rachhpal Singh was possessed of any funds for making the advance in question to the assessee on 16th March 1971. In view of the facts and the material brought out on record by the ITO, we are of the opinion that the AAC was fully justified in upholding the addition of the sum of Rs. 50,000 in the name of Shri Rachhpal Singh. We uphold the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low or by the Tribunal. But we do not find any evidence or material on record to establish that the said amount of Rs. 88,000 represented assessee's income which was consciously concealed. Their Lordships of the Supreme Court in CIT Madras vs. Khoday Eswarsa & Sons 1972 CTR (SC) 275 : (1972) 83 ITR 369 (SC) have observed that the penalty proceeding being penalty in character, the Revenue must establish that the receipt of the amount in dispute constitutes income of the assessee. It was further held in the above case that part from the falsity of the explanation given by the assessee, the Department must have before it before the levy of penalty, cogent material or evidence from which it could be inferred that the assessee had consciously concealed the particulars of its income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. Applying the above principles, we find that though the sum of Rs. 88,000 has been added back towards the total income as the explanation furnished by the assessee was found to be acceptable, that alone does not conclusively prove that the assessee was in receipt of the amount added ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earliest opportunity, the assessee had disclosed the fact about the sum of Rs. 6,04,500 recovered at his premises and thus he cannot be considered to have concealed the sum of Rs. 88,000 which was also included in the above sum. On this ground also, the conduct of the assessee cannot be called contumacious nor any charge of concealment of income can be levelied against him." 15. What happended after concellation of the impugned penalty order by the Tribunal has already been received by us in this order in para 1 to 4 supra. In pursuance of the directions of the Hon'ble High Court, we have heard the parties with a view to examine whether, on the facts and in the circumstances of this case, the assessee's case falls within the mischief of Explanation to s. 271(1)(c) of the IT Act, 1961. In determining this issue, we have to keep in focus, in particular the Judgment of the Hon'ble Punjab and Haryana High Court in the case of Vishavkarma Industries. The Hon'ble Court had pointed out three presumptions that have to be raised against the assessee in terms of the Explanation and to see whether the assessee is in a position to rebut these presumptions so as to discharge the initial onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as brought on record during the course of assessment proceedings and as gathered during the course of penalty proceedings, observed as under: "We have heard the learned representatives of the parties and have gone through the records and, in our opinion, the penalty imposed in this case cannot be upheld. It is true that the impugned sum of Rs. 88,000 said to have been obtained by the assessee from the three creditors was added back towards the total income of the assessee and the explanation furnished by the assessee with regard to the source of the said amounts was not accepted either by the authorities below or by the Tribunal. But we do not find any evidence or material on record to establish that the said amount of Rs. 88,000 represented assessee's 'income' which was consciously concealed." The Tribunal has further held that "Apart from the assessee's explanation that the amount of advance loan obtained in the names of the three above-mentioned persons has not been accepted, there is no avidence to conclusively establish that the sum of Rs. 88,000 added to the total income of the assessee represented assessee's real income which was concealed". It would be clear that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial sum has been accepted to be coming from the sources indicated by the assessee in the very first statement he made before the ITO. This should lend credence to the statements made by him with regard to other parties as well in so far as the question of invoking Explanation to s. 271(1)(c) is concerned. This is so because despite the best efforts made, the authorities below were not in a position to break any of the parties from whom the assessee claims to have taken the sum of Rs. 88,000. In fact, these parties confirmed the version of the assessee and it was only on rejection of the explanation of the assessee that the amounts were added and were upheld in appeal upto the stage of the Tribunal. 17. It is important to note that the order of the Tribunal on cross-appeals in quantum has been accepted by the parties as final giving to the assessee the benefit that he stated what was correct and genuine with regard to the object of collecting money for the purpose of purchasing shares of Kartar Bus Service (P) Ltd. Jullundur. If in the process, the assessee has not been able to satisfy the authorities concerned to the extent of Rs. 88,000, it cannot be said that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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