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2006 (1) TMI 160 - ITAT AHMEDABAD-CPenalty proceedings initiated u/s 158BFA - Search And Seizure - No reasonable opportunity provided - HELD THAT:- Assessee filed, confirmations of all the depositors, which contained names and addresses, in consideration of all these material, assessee furnished explanation in respect to corrections, insertions and cash credits. Assessee volunteered to produce creditors but only one day's time was given. Be that as it may, additions are now confirmed and we are concerned with imposition of penalty u/s 158BFA(2). Assessee relied on Tribunal judgment in the case of Nemichand vs. Asstt. CIT (Inv.) [2004 (12) TMI 303 - ITAT BANGALORE-A] and Smt. Mala Dayanidhi VB. Dy. CIT [2003 (11) TMI 280 - ITAT BANGALORE-C], Tribunal has taken a view that s. 158BFA is not mandatory but discretionary and the assessee's explanation has to be considered. We find merit in the contentions of the learned counsel that this penalty proceeding is akin to s. 271(1)(c) proceedings, main clause and in sum and substance Department has to prove factum of concealment. Quantum and penalty proceedings are distinct and separate and while deciding the issue of penalty, facts can be reconsidered. Thus, assessee's explanation to confirmations, etc. have been rejected on assumptions drawing adverse inference based on probabilities, i.e., existence of insertions and corrections and probability of accountant knowing fact of cash credits. Since we hold that it was burden of the Department, AO should have separately investigated matter in penalty proceedings by calling these parties and accountant to discharge burden. Therefore, assessee has discharged its burden of giving explanations as well as supporting the same by filing confirmations. Our views are supported by Hon'ble Supreme Court judgment in the case of Orissa Corporation [1986 (3) TMI 3 - SUPREME COURT]. Department would have discharged its burden by proving that assessee's explanation was false based on only finding of facts and not on assumptions. Our views are further fortified by the decision of Hon'ble Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan[1997 (1) TMI 6 - SUPREME COURT] wherein it has been held that the word "may" in s. 69 cannot be interpreted to be "shall". The same word appears in same context in s. 68 dealing with cash credit, which is applicable to assessee's case. In view thereof, we delete penalty. Since we have deleted penalty on merits, we need not address to the technical issue about applicability of provisions of s. 158BA(1). In the result, the appeal of the assessee is allowed.
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