TMI Blog2004 (10) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Surjit Kaur failed to explain the source of the deposit, the credit was held to be ingenuine and an addition of Rs. 20,000 was made as unexplained cash credit under s. 68 of the Act. Consequently, the interest of Rs. 2,000 accrued and paid to Smt. Surjit Kaur on the above deposit was added back to the income of the assessee. For the concealment of income, the AO initiated penalty proceedings under s. 271(1)(c) against the assessee. No compliance was made before the AO, so he held the assessee to be guilty of concealing the particulars of its income and imposed a penalty of Rs. 14,300, which was equivalent to 100 per cent of the tax sought to be evaded on the concealed income. 3. The assessee challenged this order of the AO in appeal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) was called for and consequently no penalty was exigible, hence the order of the CIT(A) sustaining the penalty should be quashed. The learned Authorized Representative for the assessee further contended that in the alternative, if the assessee is not able to prove the genuineness of the credit, it was only to the extent of Rs. 6,000 stated to be withdrawn from the bank account of Smt. Surjit Kaur but the source of the balance amount of Rs. 14,000 to have been received from her son stands proved by Smt. Surjit Kaur, so penalty could only be imposed for the unexplained credit of Rs. 6,000. 6. On the other hand, learned Departmental Representative for the Revenue, referring to the reasons given in the order of the CIT(A) and the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in error in not correctly applying the principle of law laid down by the Supreme Court in CIT vs. Mussadilal Ram Bharose (1987) 60 CTR (SC) 34 : (1987) 165 ITR 14 (SC). Therefore, the following question of law arose out of the order of the Tribunal and had to be referred to the High Court. In the facts and circumstances of this case and in the light of the law as it stood at the relevant time, has the assessee been able to discharge his onus to prove the question which arose in view of Explanation introduced by the Finance Act, 1964, to s. 271 of the Act." In (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC), it was held as under: "Held, affirming the decision of the High Court, that the penalty was validly levied. The Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but it is a simple case where the cash credit is held to be unexplained and ingenuine, though the identity of the creditor was established because the source of the credit is held to be not proved because of the falsity of the statement of the cash creditor. In the instant case, when the creditor, Smt. Surjit Kaur was asked to explain the source of Rs. 20,000 deposited with the assessee, she stated that she had received a sum of Rs. 6,000 from M/s Bala Financiers and the balance amount of Rs. 14,000 had been received in two instalments of Rs. 8,000 and Rs. 6,000 each, from her son. 8. From the copy of the deposit account filed by the assessee, it was also found that this amount of Rs. 6,000 was deposited on 1st Aug., 1978, whereas the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laining the source of deposit of Rs. 20,000 with the assessee, Smt. Surjit Kaur made a false statement. So, her statement as a whole in this regard is to be rejected and it is held that on the basis of the false statement, she tried to explain the source of deposit with the assessee. Hence, in these circumstances that once on the basis of false statement, the creditor tries to explain the source of the deposit which is unearthed by the AO on examining the creditor, the same has rightly been treated as ingenuine credit representing undisclosed income of the assessee under s. 68 and hence the assessee is guilty of concealing the particulars of its income to the extent of Rs. 20,000 and so the action of the AO in initiating the penalty proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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