TMI Blog1991 (4) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... .. Rs. 10,000 5-11-64 ... Rs. 7,000 Again, on September 30, 1964, the cash book of the assessee showed receipt of Rs. 10,800 from the State Bank of India but the bank account showed that the money had been withdrawn on October 1, 1964. Similar discrepancy was noticed on January 6, 1965, when the cash book of the assessee showed receipt of a sum of Rs. 6,000 from the bank whereas the amount had actually been withdrawn from the bank only on January 7, 1965. The Income-tax Officer required the assessee to explain the sources of these amounts totalling Rs. 43,800. The assessee explained that one Srimati Janki Devi, aunt of one of the partners of the firm, Shri Jamuna Prasad Jaiswal, who came to perform the sradha ceremony of her husband, gave old currency notes of Rs. 27,000 for being exchanged for new notes. The money deposited in the accounts on October 28, 1964 was stated to represent the cash received from her. She was given back the money by cheques encashed from the bank on October 29, 1964 and November 5, 1964 as indicated above. Regarding the other two items of Rs. 10,800 and Rs. 6,000, no explanation was given. No evidence to support the explanation given in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of hearing before the Tribunal, the assessee sought to file an affidavit from Srimati Janki Devi. The affidavit, however, was not admitted by the Tribunal as additional evidence on the ground that the assessee could not explain why this affidavit could not be filed earlier either before the Income-tax Officer or the Appellate Assistant Commissioner. The Tribunal, therefore, did not accept the explanation of the assessee in regard to the source of the sum of Rs. 27,000 and affirmed the addition made by the Income-tax Officer. The addition was, however, confined to Rs. 27,000 as that was the peak amount of the total deposits of Rs. 43,800. So far as the penalty is concerned, the Tribunal observed that the mere fact that the assessee was not able to explain the source of the particular amount to the satisfaction of the Income-tax Officer was not sufficient to justify the levy of penalty unless the Department proved that receipt of income nature was concealed. On the facts and circumstances of the case, the Tribunal held that no such proof was there. It also held that there was no fraud or gross or wilful negligence on the part of the assessee. The Tribunal also found that the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section." The nature of penalty and the principles governing imposition of the same are well-settled by a catena of decisions of the Supreme Court and the various High Courts. The propositions that emerge from these decisions can be summarised as below: (i) Provisions dealing with penalty must be strictly construed. Penalties are to be construed within the term and language of the particular statute. (ii) Penalty provision should be interpreted as it stands and, in case of doubt, in a manner favourable to the taxpayer. If the court finds that the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt the interpretation which favours the assessee, more particularly so where the provision relates to the imposition of penalty (See CIT v. Vegetable Products Ltd. [1973] 88 ITR 192, 195 (SC) and C. A. Abraham v. ITO [1961] 41 ITR 425 (SC)). (iii) An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT [1980] 123 ITR 457 (SC)). The levy of penalty must be shown to be justified by the facts of the case. Even the fact that the assessee agreed to the inclusion of cash credits or other amounts in the total income on account of his inability to prove the source or to avoid protracted litigation with the Department may not justify imposition of penalty unless the Income-tax Officer has some material to satisfy him that the disputed amount represented the income of the assessee (Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705, 712,713 (SC)). So far as levy of penalty for concealment of income or furnishing of inaccurate particulars of income in cases where section 271(1)(c) (a amended by the Finance Act, 1964) applies (as in the present case) is concerned, the aforesaid principle will have to be read in the light of the Explanation to sub-section (1) of section 271 which was inserted with effect from January 1, 1964. Prior to the insertion of this Explanation, the onus was on the Revenue to prove that the assessee had concealed his income or furnished inaccurate particulars of such income. To obviate the difficulties which were found in proving the positive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t materials, come to the conclusion that, in spite of the presumption, the assessee was not guilty. No question of law will arise from such a conclusion. The law was summarised by the Supreme Court in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14, in the following words (at page 22) : "The position, therefore, in law is clear. If the returned income is less than 80% of the assessed income, the presumption is raised against the assessee that the assessee is guilty of fraud or gross or wilful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent. It is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body, bearing the aforesaid principles in mind, comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact. No question of law arises." On the facts, it was held in that case that (p. 23) "the Tribunal has borne in mind the relevant principles of law and has also judged the facts on record. It is not a case that there was no evidence or there was such evidence on which no reasonable man could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned but when the question of penalty comes, different considerations will apply and the Income-tax Officer will be required to put on record some further material other than the rejection of the explanation of the assessee in regard to its source to hold that the amount in question was the income of the assessee to justify imposition of penalty. We may now apply the aforesaid principles to the facts of the present case to determine whether the Tribunal was justified in deleting the penalty levied by the Inspecting Assistant Commissioner. The dispute in the instant case related to delivery of currency notes of Rs. 27,000 by Smt. Janki Devi to the assessee firm. The explanation in regard to the source of the said amount was rejected for failure of the assessee to produce requisite evidence in support thereof. The Inspecting Assistant Commissioner levied the penalty as the assessee failed to produce reliable evidence in support of his contention that the lady actually deposited the amount with the assessee. It was on this account that a conclusion was arrived at that the amount was nothing but the income of the assessee from undisclosed sources. The assessee thereafter collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of the onus to prove the positive. The Explanation will, however, come into operation only when the Department has proved that the assessed amount represented the income of the assessee. The Tribunal, in the instant case, has arrived at a categorical finding that the Revenue failed to prove that a receipt of income nature was concealed. The Tribunal has also arrived at a further finding that there was no fraud or gross or wilful negligence on the part of the assessee. The explanation given by the assessee was not denied by Smt. Janki Devi. These are the findings of fact arrived at by the Tribunal on a consideration of the facts and circumstances of the case. It was in view of these findings that the penalty was cancelled by the Tribunal. On a careful consideration of the aforesaid findings of the Tribunal in the light of the law stated above, we are of the clear opinion that the Tribunal, in the instant case, was justified in cancelling the penalty. Besides, as observed in Mussadilal Ram Bharose [1987] 165 ITR 14 (SC), that, if such a fact-finding body, bearing the proper principles in mind, comes to the conclusion that the assessee has discharged the onus put on him under t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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