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TMI Blog1997 (12) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal restored the matter back to the file of the CIT(A) who in his turn set aside the order of the AO directing that reasonable opportunity of being heard to the assessee should be provided. 4. On examination of books of accounts of Jalan Trading Company, Bombay, cash credits amounting to Rs. 25.49 lakhs stood in the name of Jalan HUF/Lohia Agricultural Farm. A further scrutiny of two other concerns of the same group where close relations of the partner of the assessee-firm, were partners, revealed cash credits of Rs. 11,40,000 and Rs. 7 lakhs, respectively for the asst. yr. 1976-77. Thus, a total cash credit of Rs. 43.89 lakhs appeared in the books of this assessee in the account of Lohia Agricultural Farm A/c in different concerns of the assessee from 26th Nov., 1974 to 7th Oct., 1975. The assessee was asked to explain the sources of cash credit and explanations with regard to the same, if any. The assessee was further required to produce books of account of Lohia Agricultural Farm (LAF) for the relevant period, details of land and cultivation carried on the same, details of the land of LAF, acquired by the LAF during the land ceiling proceedings, land and quantity of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. The AO however insisted upon the assessee to provide the evidence regarding irrigation of the farm and its full mechanisation and using of fertilisers of improved seeds, etc. It was submitted that after conducting enquiries during the asst. yr. 1974-75 at Baharaich and examining several witnesses, the Department made various additions in the cases of debtors of LAF which were ultimately confirmed by the Tribunal. It was submitted that during VDS-cum-settlement of 1975, the CIT(A) has accepted that an income of Rs. 2,000 per year per acre should be estimated. The officer, however, found out that the land of 2000 acres was ultimately reduced to 500 acres only. It was stated that an average income per year per acre was Rs. 3,000 to Rs. 6,000. It was submitted that the finding of the CIT(A), Central-I, Bombay that there was 1100 acres of land cannot be challenged any more. The AO, however, did not accept this plea on the ground that such statements were not supported by any other material on record. When the AO decided to visit Baharaich himself, the assessee stated that the firm was closed down from 1982 and they did not have any connection with the firm. The ITO however was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while the total agricultural income upto 1972 was estimated at Rs. 1,67,75,000 and after considering the expenses, it was estimated only at Rs. 97,75,000. The position of the income-tax returns of LAF was equally dismal. On the basis of the above material, the AO was of the opinion that the cash credits amounting to Rs. 25,41,000 was not properly explained and added back to the total income of the assessee. Proceedings under s. 271(1)(c) were also initiated against the assessee. 5. The CIT(A) in a very detailed order dismissed the appeal of the assessee. He accepted the findings of the AO. 6. When the matter was brought to the Tribunal, another detailed order was passed confirming that order. While the matter was in appeal before the CIT(A) in quantum, the AO gave an opportunity of being heard to the assessee with regard to the imposition of penalty under s. 271(1)(c) of the Act and it was held as below: (i) The assessee failed to produce any evidence regarding taxable income. (ii) The assessee failed to co-operate with the Department and the AO proceeded to the firm of LAF. (iii) He also found that the agricultural income has been accepted upto the year 1972. (iv) No d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention was also invited to the decision of the Bombay High Court in the case of Bombay Inventors Industrial Corpn. vs. CIT (1991) 96 CTR (Bom) 206 : (1991) 194 ITR 548 (Bom) and in the case of Ahmedabad Electricity Comp. Ltd. vs. CIT (1992) 106 CTR (Bom) (FB) 78 : (1992) 199 ITR 351 (Bom)(FB). It was submitted that in view of the fact that the AO never informed the assessee that the penalty was being imposed under one of the Explanations applicable to s. 271(1)(c) of the Act and that order was illegal and has to be quashed. 9. Coming to the merits of the case, the assessee's counsel submitted that even if it is conceded that the assessee has failed to prove that LAF had sufficient agricultural income, there cannot be any dispute that LAF had some agricultural income. The LAF agreed to have advanced the amounts in question to the assessee and its group of companies, hence if they did not have that capacity to advance that much of money have been made in their hands thus and the additions on account of unexplained sources of income should have been made in their hands. It was not done so. It was also submitted that during the assessment and penalty proceedings, the AO visited t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, right from the beginning submitted false documents, showed false expenses, false purchases and false sales. It was submitted that when the assessee was asked during the regular assessment proceedings to prove its case, it has miserably failed to do so. He also invited our attention to the decision of Bombay High Court in the case of CIT vs. Smt. Kaushalya & Ors. (1995) 216 ITR 660 (Bom). It was submitted that the assessee very well knew the malafide charges against him were there and did not defend himself at all properly. It was, therefore, submitted that the decision of the Gujarat High Court in the case of CIT vs. Lakhdhir Lalji (1972) 85 ITR 77 (Guj) is also of some importance. Taking to the facts of the case, it was submitted that right from the beginning, the assessee had manufactured a lot of evidence to prove that it was having agricultural income which was later on found to be incorrect. It was further submitted that as the quantum added to the totel income by the Asstt. CIT & Dy. CIT which had been confirmed by both the CIT(A) and the Tribunal. It should be held that the assessee had concealed the particulars of income and, therefore, the penalty in this regard s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticulars of income at all. This Explanation has shifted the burden of proof to the assessee and therefore when the Explanation was resorted to by the ITO or by the IAC in penalty proceedings, it was necessary that the assessee must have been informed that the penalty proceedings against him were commenced under the Expln. to s. 271(1)(c) of the Act. 12. The reliance of the standing counsel for the Department on (1995) 216 ITR 660 (Bom) is not very helpful to the Department. In that case, the Hon'ble High Court gave a clear finding that the assessee fully knew in detail the exact charge of the Department against her. In this case, the assessee did not know when the notice was served on him that Expln. to s. 271(1)(c) will be applied against him. Under the facts and the circumstances of the case, we are of the opinion that it is not a case of mere vagueness of notice and it is case of complete denial of opportunity to the assessee. Under the circumstances, we are of the opinion that the penalty imposed by the AO and confirmed by the CIT(A) is not valid and it is to be cancelled. 13. The assessee had raised another legal ground relating to the jurisdiction of the IAC levying the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.e.f. 10th July, 1978, stood as under: (1) The CIT may, by general or special order in writing, direct that all or any of the powers or functions conferred on, or assigned to, the ITO or ITOs by or under this Act in respect of any area, or persons or classes of persons, or income or classes of income, or cases or classes of cases, shall be exercised or performed concurrently by the IAC. (2) Where under sub-s. (1), an IAC exercises concurrent jurisdiction with one or more ITOs in respect of any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, the ITO or ITOs shall exercise the powers and perform the functions under this Act in relation thereto as the IAC may direct. (3) Without prejudice to the generality of the provisions contained in sub-s. (3) of s. 119, every ITO shall also observe and follow such instructions may be issued to him for this guidance by the IAC within whose jurisdiction he performs his functions in relation to any particular proceeding or the initiation of any proceeding under this Act. Provided that no instructions, which are prejudicial to the assessee, shall be issued before an opportunity is given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and circumstances, I am of the opinion that penalty orders under s. 271(1)(c) in all these assessment years having been passed by the IAC (Asst.), Range, were without jurisdiction and consequently void ab initio. The penalty orders under s. 271(1)(c) for all these assessments, are, therefore, cancelled on this ground also. 20. With regard to the penalties imposed under s. 273, we are of the opinion that during the previous financial year, when according to the Department, the assessee had income from 'undisclosed sources', there was any material on record to show that the contention of the Department is correct. The assessee during the previous financial year could never be under the impression that the income claimed by it as agricultural income will be treated as income from 'other sources' and will not be believed as having been source of cash credits. Therefore, in our opinion, there was no reason for the assessee to have come to the conclusion that it had income which was liable for advance taxes in the previous financial year. Accordingly, the penalties levied under s. 273 are also cancelled. 21. In the result, the appeals by the assessee are allowed. Department's ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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