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TMI Blog1989 (3) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... ined to the assessment year under consideration. From the scrutiny of the account books for the year under consideration, which had been seized during the course of the search, it was found that the assessee had done trading in ground-nut seeds and oil. The various entries made in the seized accounts had shown that the assessee had suffered a loss of Rs. 1,09,011 in the trading transactions in ground-nut seeds and oil. The ITO also noticed that there were certain entries in the cash book in code letters which showed availability of funds. It has been pointed out by the ITO that these entries were noted under the Kannada letter "SHI" and English letter "T". The peak amount of the various entries made under the Kannada letter "SHI" and English letter "T" came to Rs. 4,73,363 its on 2-6-1976. The transactions noted in these seized accounts had not found place in the books of account produced by the assessee for income-tax purposes. The assessee was provided by the ITO with various opportunities to explain the nature of the transactions recorded in the seized books of account. The assessee failed to furnish any explanation in respect thereof and the assessee gave evasive replies. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khs only as income from undisclosed sources. The draft assessment order may be modified accordingly and the assessment completed." Thereupon, the ITO completed the assessment, making an addition of Rs. 3 lakhs as directed by the IAC. It is in respect of this addition that the impugned penalty of Rs. 1,75,120 for concealment of income under section 271(1)(c) had been levied by the ITO by his order dated 14-2-1983. 4. Being aggrieved by the imposition of penalty by the ITO, the assessee went up in appeal before the CIT(A). The CIT(A) confirmed the levy of penalty. The assessee has now come up in further appeal before us. The contention of the assessee is that in the facts of the case, it could not be said that the assessee had concealed the particulars of its income or furnished inaccurate particulars of such income and, hence, it was not justified to impose penalty under sec. 271(1)(c). 5. The departmental representative, on the other hand, opposed the contention of the assessee. According to the departmental representative, it was a fit case for the levy of the penalty and the imposition of penalty was absolutely justified. The departmental representative also contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot having applied its mind to the aspect to draw inference of facts by applying the said Explanation we cannot answer the question referred to us on that basis. In fact, it was to be a case of pure question of law we would have ourselves applied the said explanation, but the same involves drawing conclusions of fact on which inference of law has to be based. When the conclusions of fact reached by the Tribunal are based on conjectures, surmises and suspicions, we have no choice except to find such conclusions as vitiated. The presumption under the explanation not having been raised to examine the facts and consequently whether such presumption is rebutted not having been considered in any of the proceedings from which this reference arises, we find it difficult to examine for the first time on such mixed questions of law and facts." 8. From the above, it is apparent that the High Court did not examine the applicability of the Explanation, because the relevant facts for deciding whether the Explanation came into play or not, were not on record. But we find that in the present case, the relevant facts for examining the applicability of the Explanation are on record. Hence, the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed : Provided that nothing contained in this Explanation shall apply to a case referred to in clause (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 is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him." 9. We find that all the relevant facts for deciding whether this Explanation will be applicable to the facts of the present case or not, are on record. This Explanation provides that where in respect of any facts material to the computation of the total income, the assessee fails to offer an explanation or offers an explanation which is found to be false or which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fact that relevant data to decide the issue was not on the records of reference. It is clear from this observation extracted above, that if the necessary data had been on record, they would certainly have examined the issue of the applicability of the Explanation ; since in that case it would have been a pure question of law. In the present case, since all the relevant facts for deciding the issue of the applicability of Explanation are on record, in our view, the question of the applicability of the Explanation has to be gone into. Moreover, the Tribunal is a fact finding authority. From that angle also, the Tribunal cannot decline to go into the question of the applicability of the Explanation. We will draw attention to the decision of the Punjab Haryana High Court in the case of CIT v. Rajeshwar Singh [1986] 162 ITR 173/26 Taxman 439. The High Court had observed as under : "Though the Income-tax Officer did not invoke the Explanation to section 271(1)(c) of the Income-tax Act, 1961, for levying penalty for concealment of income and the Appellate Assistant Commissioner also did not refer to the Explanation when he deleted the penalty, the Revenue for the first time be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars thereof is not applicable. In the present case, the Explanation is squarely applicable. The assessee had not furnished any explanation in respect of entries in its duplicate books of account. It is not a case where the assessee had furnished a bona fide explanation, but he was not in a position to substantiate it. It is a case where the assessee had failed to furnish any explanation whatsoever, and the assessee had surrendered the amount for addition. It is, hence, held by us that under Explanation 1 to section 271(1)(c), the assessee was to be deemed to have concealed its income. 12. Now we will examine the question whether, even under the main provisions of sec. 271(1)(c), the assessee could be considered to have concealed the particulars of its income or furnished inaccurate particulars of its income. It was vehemently urged by the authorised representative of the assessee that no charge of concealment could be levelled against the assessee. It was pointed out by him that just because a certain sum had been assessed in the hands of the assessee, it would not be justified for the department to levy penalty for concealment of income. It was stated that until and unless the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncealed. We will draw attention to the decision of the Delhi High Court in the case of Durga Timber Works v. CIT [1971] 79 ITR 63. In that case, there were certain cash credits in the books of the assessee in the accounting period relevant to assessment year 1960-61. When the assessee was asked to adduce evidence to establish these cash credits, it admitted that the amount may be treated as its concealed income and included in its total income. The amount was added by the ITO and penalty for concealment of income under sec. 271(1)(c) was imposed. The High Court confirmed the levy of penalty. The High Court observed that if, even after the assessee had admitted that the amount be treated as its concealed income, the department was still required to prove by independent evidence that the assessee had concealed its income, it would amount to laying an impossible burden of proof on the department and making the provisions for imposition of penalty wholly unworkable. 14. From all these facts, it becomes abundantly clear that the assessee had concealed its income and had made itself liable to the imposition of penalty under sec. 271(1)(c). We are, hence, of the view that even under th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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