TMI Blog2000 (3) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... g to Rs. 2,76,732. In further appeal the Tribunal vide its order dated 28-9-1993 allowed the benefit of set off as requested by the assessee and upheld the addition to the extent of Rs. 1,45,640 allowing benefit of set of with regard to the balance addition of Rs. 1,31,092. 4. The Assessing Officer initiated penalty proceedings during the course of assessment proceedings and proceeded to levy penalty of Rs. 1,82,648 under section 271(1)(c). In relation to the following two items (i) Rs. 1,63,140 on the basis of unexplained transactions in the loose papers and (ii) unexplained cash found during search Rs. 1,13,592. While levying the impugned penalty, the Assessing Officer invoked Explanation I to Section 271(1)(c). The CIT(A) vide the impugned order dated 2-3-1994 upheld the levy of penalty however directed the Assessing Officer to recompute the penalty after giving effect to the order of the Tribunal in quantum appeal. The ld. counsel submitted the calculation before us and stated that the recomputed penalty under section 271(1)(c) would work out to Rs. 96,122. 5. Aggrieved by the order of the CIT(A) the assessee has come up in appeal before us. 6. A few facts with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 1-7-1980 and it shows that whatever payments were received by cash were being deposited in the bank account. The assessee has shown the payments of cash only for very very petty expenses. Thus, it is not established by the assessee that the cash which was found during the course of search was explained by the books of account maintained by him. There is also another book which maintains details regarding the payment received by cheque. This is as per S.No. 8 of the Panchnama. This book starts from 1-7-1980 and is written upto 5-8-1980. On 15-7-1980 vide this book page No. 9 the assessee made payment of Rs. 502 and Rs. 300 by cheque for the expenditure incurred on petty accounts. If the assessee had available cash as he wants to explain, he would not have made these payments by cheque. There is yet another register which is described as cash register. Its number is 106 as per Panchnama and as per this register also, the assessee was remaining aware of the cash position from day to day. This cash register is maintained from 14-5-1980 and the transactions are written upto 11-8-1980. As per this book also, whatever cash was being received was deposited in the bank on the very next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered. In ground No. 14 it has been submitted that the addition made on the basis of loose papers found and seized during the course of search according to the department includes items of unaccounted receipts of the sums of Rs. 1,09,265 and Rs. 36,375. The fact that it has been treated as receipt by the department is verifiable from the order under section 132(5) passed by the ITO. If these amounts are regarded as receipts, the corresponding payments as per loose papers of Rs. 17,500 and the cash found during the course of search of Rs. 1,13,592 will be adequately explained out of the so called unexplained receipts determined on the basis of seized papers." Accepting the argument of the ld. counsel the Tribunal held vide para 8 of its order as under: "It is thus clear that according to the department the various loose papers show that the assessee received unaccounted amount aggregating to Rs. 1,45,640 (Rs. 1,09,265 - plus Rs. 36,375) out of which payments aggregating to Rs. 17,502 were made. This leaves a balance amount of Rs. 1,28,138 which adequately covers the unaccounted cash of Rs. 1,13,592 found and seized during the course of search. We, therefore, consider it j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on record in support of the conclusion that the receipts of money recorded in the loose papers seized from the possession of the assessee and reflected in the unexplained cash seized from the premises represent the concealed income of the assessee. In fact the assessee had itself conceded the addition made on the basis of loose papers and sought telescoping the said addition against the addition on account of the seized cash. Thus the notings recorded on the loose papers are amply supported and reflected in the seized cash and benefit of set off as sought by the assessee has been allowed by the Tribunal, as indicated hereinbefore. Once the assessee has sought benefit of set off of the addition on account of seized cash against the receipts reflected in the loose papers, the assessee cannot turn back and say that the loose papers seized from its possession during search operations do not belong to it. At this stage it would be relevant to mention that Explanation II appended to section 271(1)(c), introduced by the Taxation Laws (Amendment) Act 1974 provides for initiation and levy of penalty in situations where any receipt or deposit etc. is claimed by any person as attributable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of the matter we are of the considered opinion that the provisions of section 132(4A) of Income-tax Act are applicable and the presumption of ownership has not been rebutted by the assessee. Therefore the seized papers belong to the assessee and the addition on the basis of unaccounted receipts reflected therein represents the concealed income of the assessee and penalty under section 271(1)(c) is therefore clearly leviable. 14. In support of our view, reliance is placed on the landmark judgment of the Supreme Court in Chuharmal v. CIT [1988] 172 ITR 250 at page 255 of the reports their Lordships observed: "In this connection reference may be made to the views expressed by Justice Tulzapurkar, as his Lordship then was, of the Bombay High Court in the case of J.S. Parkar v. V.B. Palekar [1974] 94 ITR 616, where, on a difference of opinion between Justice Deshpande and Justice Mukhi, Justice Tulzapurkar agreed with Justice Despande and held on the question whether the evidence established that the petitioner was the owner of the gold seized, though there was no direct evidence placed before the taxing authorities to prove that the petitioner had actually invested moneys for pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of penalty under section 271(1)(c), the Assessing Officer is unquestionably entitled to consider the facts and material brought on record during assessment proceedings and if such material in the opinion of the Assessing Officer justify the imposition of penalty, the penalty would clearly be leviable. This is particularly so in the case in hand where the assessee did not make even a faint attempt during penalty proceedings to controvert or refute the material on record. 15. Apart from the levy of penalty under the main provisions contained in section 271(1)(c), it is relevant to note that the Assessing Officer has invoked Explanation I to section 271(1)(c) and held that with regard to seized cash, the explanation furnished by the assessee has not been substantiated and clause (B) of Explanation (1) would be applicable in so far as addition on account of unexplained cash is concerned. With regard to addition on the basis of notings in the loose papers the Assessing Officer has observed that no explanation has been offered by the assessee and clause (A) to Explanation (1) is applicable. 16. We may now consider the issue of levy of penalty by the Assessing Officer by applying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further there is a journal appearing at Srl. No. 8 of the Panchnama which starts from 1-7-1980 and is written upto 5-8-1980. This journal shows payments made by cheque for petty amounts which clearly indicates that the cash in hand as per accounted version is a meagre amount. The Assessing Officer has further referred to the register appearing at Srl. No. 106 of the Panchnama maintained from 14-5-1980 to 11-8-1980 as per this register also whatever cash was being received was being deposited in the bank on the very next day. Thus none of the aforesaid journals and registers seized during search operations from the business premises of the assessee reflect the cash of Rs. 1,13,592 found during search operations. Thus the revenue has effectively established that the explanation furnished by the assessee for explaining the cash found is not correct. In the light of these facts we hold that the assessee has failed to rebut the presumption enacted under Explanation (1) on the test of preponderance of probabilities. Therefore in our opinion Explanation (1) is clearly applicable and penalty under section 271(1)(c) is therefore leviable. 17. In support of the view being taken by us above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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