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TMI Blog1993 (11) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order. It was submitted that mere disallowance could not be the basis for the levy of penalty and this was only a case where the assessee's explanation had been disbelieved. This could not lead to a reasonable and positive conclusion that the amount represented the assessee's income. However, the Assessing Officer did not accept the explanation. He referred to the orders of the CIT (Appeals) and the Tribunal holding that the assessee had failed to discharge the onus of proving the genuineness of the credit of Rs. 3 lac and, therefore, it amounted to "concealed income of the assessee and, therefore, penalty under section 271(1)(c) should be levied on the amount of Rs. 3 lac at under section 68". 3. A similar explanation was submitted with regard to the addition of Rs. 11,001 saying that the assessee's explanation had been disbelieved and this did not invite a penalty for concealment. However, the Assessing Officer observed that "in absence of any satisfactory explanation Rs. 11,001 had been considered income of the assessee and held by the appellate authority. I consider this amount for the purposes of levy of penalty". Thereafter, he calculated minimum penalty on con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the question of law was answered in favour of the assessee and, thereafter the addition of Rs. 3 lac was deleted from the assessee's income. In such a situation, the assessee would have no remedy to have the penalty also cancelled. 8. The learned counsel for the assessee also invited our attention in the same connection to an order of the Tribunal, Bombay Bench 'B' in the case of K.C. Nariman v. ITO [IT Appeal No. 6400 (Bom.) of 1983 dated January 1989]. In that case, the Tribunal had rejected an application under section 256(1) of the Act in respect of an addition of Rs. 2,64,781 sustained by the Tribunal. However, the Hon'ble High Court had directed the Tribunal under section 256(2) of the Act, to draw up a statement of the case and refer the following question for their opinion : "Whether, on the facts and the circumstances of the case and on a proper interpretation of section 68 of the Income-tax Act, 1961, the sum of Rs. 2,64,781 was assessable as income of the assessee under that section?" 9. According to the learned counsel, a penalty of Rs. 1,80,440 under section 271(1)(c) of the Act had been cancelled by the Tribunal because of the above direction of the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act did not apply to the assessee's case. Secondly, even if it applied, the assessee's case would be saved by the proviso to the said Explanation Thirdly, the CIT (Appeals) had deleted Rs. 2,64,781 in the quantum proceeding, meaning thereby that the matter was substantially contentious. Fourthly, the Tribunal had restored the addition on inference drawn on the material available on record. Fifthly, the High Court had granted reference under section 256(2) of the Act. The facts of the case were considered in detail thereafter and the Tribunal cancelled the penalty as a result of the above cumulative five factors. Thus, the decision cannot be said to have laid down a legal proposition that in a case where reference was granted under section 256(2), of the Act, no penalty under section 271(1)(c) of the Act could be sustained solely on this ground. However, the decision is a precedent for the proposition that such a reference is one of the valid considerations in favour of the assessee. We will proceed accordingly. 13. The learned counsel for the assessee has raised another preliminary objection which will now be taken up. Our attention has been invited to the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal also examined a letter dated 28-10-1985, stated to have been filed by the assessee, according to which, the sum was found "at the office premises of Diamond Trusts Investments Private Limited" and the same position was reiterated on the next page. In view of this, the Tribunal held that the cash was found at the assessee's premises itself. The owner of the money was not identified, as claimed by the assessee. In view of this, the addition of Rs. 11,001 was confirmed. 17. Regarding the sum of Rs. 3 lac, it was in the name of Deejay Properties Constructions Pvt. Ltd. and a confirmatory letter dated 18-2-1987 was available which showed that the creditor was assessed by the Income-tax Officer, Company Circle 20, at Delhi, with GIR No. D-9. However, the letter contained Bombay address and not the Delhi address and did not specify the reason for giving the money and giving it by bearer cheque. Further, the assessee did not prove the return of the money. In view of this, the addition was confirmed. 18. The learned counsel for the assessee submitted that an affidavit had been filed in the course of penalty proceedings by Sri Darshanjeet Singh, Director of Deejay Propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the assessee, in reply, stated that the affidavit had evidenciary value and could not be rejected without cross-examination, relying on the decision of the Supreme Court in Mehta Parikh Co. v. CIT [1956] 30 ITR 181. 23. We have considered the rival submissions carefully. The CIT (Appeals) has confirmed the penalty with reference to clause (A) of Explanation 1, to section 271(1)(c) of the Act only and, therefore, we will confine our attention to this provision. They are reproduced below for the sake of convenience : "Explanation 1 : Where in respect of any facts material to the computation of the total income of any person under this Act,--- (A) such person fails to offer are explanation or offers an explanation which is found by the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) to be false, or (B)....................................................................................... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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