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TMI Blog1998 (5) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 25,651 in Flame Agencies and it was also found that he had made an investment in the purchase of a VCR for Rs. 14,600. The Assessing Officer made these additions and initiated penalty proceedings under section 271(1)(c). The assessee appealed and the Commissioner of Income-tax (Appeals) confirmed both the additions and on further appeal the Tribunal deleted the addition of Rs. 25,651. However, the addition of Rs. 14,600 was confirmed by the Tribunal, vide order dated June 27, 1996, in I.T.A. No. 487/Chandi of 1990. In the meanwhile, the Assessing Officer initiated penalty proceedings and after considering the explanation of the assessee, penalty of Rs. 17,500 was imposed. The assessee appealed and pleaded before the learned first appellate authority that since the concealed income exceeded Rs. 25,000 the Assessing Officer was required to seek the approval of the Range Deputy Commissioner of Income-tax before levying the penalty. Accordingly, the Commissioner of Income-tax (Appeals) set aside the penalty order to the file of the Assessing Officer with the direction that he should obtain prior approval of the Range Deputy Commissioner of Income-tax before levying penalty and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d lay on the Department to show concealment coupled with mens rea. Since the addition has been made only on the basis of a paper found from the residence of the assessee which was not in the name of the assessee and the VCR whose number was on the customs receipt was also not found from the residence of the assessee, the mere fact that the addition has been confirmed by the Tribunal will not be sufficient to hold that the assessee was guilty of concealment of income within the substantive provisions of section 271(1)(c). Reliance was placed on the decision of the Bombay High Court in the case of CIT v. P.M. Shah [1993] 203 ITR 792 and CIT v. Dharamchand L. Shah [1993] 204 ITR 462 as also the decision of the Income-tax Appellate Tribunal, Bombay A-Bench in the case of Sidhivinayak Chemicals P. Ltd. v. Asst. CIT [1995] 126 CTR 266. The learned Departmental Representative supported the order of the learned Commissioner of Income-tax (Appeals). We have considered the rival submissions. The addition of Rs. 14,600 has been sustained by the Tribunal vide order dated June 27, 1996, in I.T.A. No. 487/Chandi of 1990, by observing as under: "8. We have considered the rival contentions, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to be deleted. U.B.S. BEDI (judicial Member).- I have gone through the proposed order of the learned Accountant Member but find myself unable to agree to the conclusions arrived at by him and I base my reasons and conclusion for the same as given below. For the facts, paras. 3 and 4 of the proposed order and for arguments of learned counsel for the assessee para. 5 are relevant and need not be repeated. The learned Departmental Representative, while supporting the order of the learned Commissioner of Income-tax (Appeals), reiterated the arguments as taken before the authorities below and further submitted that penalty had been imposed on two items, one for cash credit of Rs. 25,652 in the name of Flame Agencies taken in the books of the assessee recorded from March 16, 1984, to March 30, 1984, and the other on account of investment of Rs. 14,600 in the purchase of a VCR, which remains unexplained. It was submitted by the learned Departmental Representative that the addition on account of first item of Rs. 25,652 had been deleted in the quantum appeal of the assessee by this Bench vide order dated May 27, 1995, but so far as the second addition on account of investment in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee. The onus lay on the assessee to rebut the presumption raised in law. 8. We have considered the rival contentions and we are of the view that the addition made had to be sustained inasmuch as the VCR found at the residence of the assessee at the time of the search, was not properly explained, in the light of the customs receipt during the search operation. It was for the assessee to discharge the onus in that respect. The recovery of the receipt at the residence of the assessee did lay heavy burden on the assessee to explain as to how the receipt was found at his place. The number recorded on the receipt and the one found on the VCR were indeed different but that would not exonerate the assessee from discharging the onus. It is correct that one VCR was found at the residence of the assessee. The receipt might or might not relate to that VCR but that discrepancy was required to be explained by none other than the assessee. It was for the assessee to explain the investment in respect of the VCR found and also to explain the circumstances in which the customs receipt was recovered from the residence. The addition is, therefore, found to have been rightly made. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member that penalty levied by the Departmental authorities in relation to the alleged investment of Rs. 14,600, should be deleted is correct or the view taken by the Judicial Member that penalty in relation to the above investment be confirmed, is justified?" The facts of the case briefly stated are that the search and seizure operations were conducted under section 132 on the business and residential premises of the assessee on August 29/30, 1985, resulting in seizure of documents and records which included, inter alia, one day-book marked ten relating to Flame Agencies and one customs receipt bearing No. 81728, dated October 15, 1983, in the name of one Shri Raminder Singh Grewal. The customs receipt pertained to payment of customs duty amounting to Rs. 9,645 for import of the VCR bearing Identification No. NV-30 13 AL-014270. One imported VCR was also found at the residence of the assessee bearing Identification No. NV-300 EN-N with S. No. 13KL00848 which was different from the one mentioned in the customs receipt. While making the assessment, the Assessing Officer made addition of Rs. 25,651 on account of credits in the name of the assessee appearing in the seized day-book. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of the Bombay High Court in the case of CIT v. P.M. Shah [1993] 203 ITR 792 and CIT v. Dharamchand L. Shah [1993] 204 ITR 462, as also the decision of the Appellate Tribunal, Bombay A-Bench, in the case of Sidhivinayak Chemicals P. Ltd. v. Asst. CIT [1995] 126 CTR 266. The learned Accountant Member held that since there is no material on record to prove that the assessee has concealed the income, no penalty for concealment can be sustained. The learned Judicial Member in his dissenting order held that since the assessee has failed to discharge the onus to explain the investment in the purchase of the VCR, the penalty is liable to be sustained. However, the learned Judicial Member has not expressed any opinion with regard to invoking the Explanation. Before me, learned counsel for the assessee argued that the customs receipt found from the residence of the assessee was in the name of Shri Raminder Singh Grewal and did not belong to the assessee. He further submitted that the VCR found from the residence of the assessee having identification number different from that mentioned in the receipt has been found to be explained by the tax authorities. In the absence of posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is therefore not correct. It would therefore be necessary to examine the issue of exigibility of penalty in the light of the Explanation 1 to section 271(1)(c). At this juncture it is necessary to refer to the legislative history in so far as section 271(1)(c) is concerned. There are three stages of amendment of section 271(1)(c). The periods are (a) prior to April 1, 1964, (b) April 1, 1964, to March, 1976, and (c) after April 1, 1976. In a series of decisions beginning with the judgment in the case of CIT v. Anwar Ali [1970] 76 ITR 696 (SC) based on the law as it stood prior to April 1, 1964, the Supreme Court laid down the following basic principles for levy of penalty under these provisions: (i) An order imposing penalty is the result of quasi-criminal proceedings and the burden lay on the income-tax Department to establish that the disputed amount represents his income; and (ii) The Department has to prove that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars thereof. Finance Act, 1964, made the following amendments with effect from April 1, 1964: (i) In clause (c), the word "deliberately' occurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies something more than a mere untruth. Untruth is simply a statement which is not true and may have been uttered without intention to deceive and through ignorance. However, falsehood necessarily denotes the violation of truth for the purposes of deceit. Merely because the explanation furnished by the assessee is considered not satisfactory or unreasonable would not ipso facto justify the invocation of clause (A) to levy penalty under section 271(1)(c). Applying the aforesaid principles to the facts of the instant case, I am of the considered opinion that the case of the assessee is not hit by the mischief of Explanation 1 and, therefore, penalty levied under section 271(1)(c) cannot be sustained. The tax authorities have come to the conclusion in the quantum proceedings that the assessee purchased two VCRs and one VCR found at the residence is explained, whereas the VCR corresponding to the customs receipt found at the residence of the assessee remains unexplained. The customs receipt obviously does not belong to the assessee, since it is in the name of Shri Raminder Singh Grewal. It is not the case of the department that the said Shri Grewal is merely a dummy entity. The presu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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