TMI Blog1995 (2) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings u/s 271(1)(c) for addition of cash credit of Rs. 1,54,702. He being not satisfied with the explanation of the assessee levied penalty u/s 271(1)(c) amounting to Rs. 1,05,580 vide his order dated 2-3-1987. In appeal, the CIT(A) restricted the penalty to the extent of addition upheld by the I.T.A.T. in quantum appeal. Accordingly, he reduced the penalty from Rs. 1,01,580 to Rs. 10,490. The assessee is in appeal against the upholding of the penalty to the tune of Rs. 10,490. 3. 1 At the time of hearing, the learned counsel for the assessee has submitted that no penalty u/s 271(1)(c) was leviable, in this case, for the following reasons : (a) The additions were made u/s 68 of the Income-tax Act which is only a deeming provision. The fiction as provided in section 68 will enable the AO to make the addition but the applicability of section 68 cannot be extended for levying penalty u/s 271(1)(c) of the Act. (b) Before any penalty u/s 271(1)(c) can be levied, the AO has to establish that there was concealment of income by the assessee. (c) Even on facts the assessee has proved the credit as it filed the affidavit of Smt. Phula Devi and Ram Parkash and to est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from business ". Therefore, section 68 enacts a deeming provision which is in effect only a statutory recognition of what was the law even prior to enactment of 1961 Act. 3.4 The other argument of the assessee's counsel that the AO must positively establish concealment of income by the assessee, before levying the penalty u/s 271 (1) (c), is probably based on the renowned decision of Hon'ble Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696. In that case their Lordships have held, " That in the absence of cogent material evidence, apart from the falsity of the respondent's explanation from which it could be inferred that the respondent had concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the source and that the disputed amount was a revenue receipt, the penalty could not be imposed ". The above decision of the Hon'ble Supreme Court was given while considering the penalty levied u/s 28(1)(c) of the Indian Income-tax Act, 1922. The provisions of section 28(1) (c) were in pari materia with the provisions of section 271 (i)(c) of the Income-tax Act, 1961 as originally enacted. However, by the Finance Act, 1964, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court was in error in not correctly applying the principle of law laid down by the Supreme Court in CIT v. Mussadilal Ram Bharose 165 ITR 14. " 3.6 The Hon'ble Supreme Court again considered the impact of explanation upon the applicability of Anwar Ali's case in the case of CIT v. Jeevan Lal Sah [1994] 205 ITR 244 and held as under : " Where the Explanation has made a difference is while deciding that question the presumption created by It has to be applied, which has the effect of shifting the burden of proof. The rule regarding burden of proof enunciated in CIT v. Anwar Ali [1970] 76 ITR 696 (SC), is no longer valid. Whether it is a case of undisclosed or unexplained cash deposit or any other concealment the standard is the same. The principle enunciated in Anwar Ali's case that mere rejection of the explanation of the assessee is not sufficient for levying penalty no longe holds goods and it is no longer necessary that the Department must go further and establish that there was conscious concealment of particulars of income or a deliberate failure to furnish accurate particulars. The cases to which the Explanation attracted is have to be decided in the light of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat explanation of the assessee is unbelievable or by showing that the evidence furnished by the assessee himself falsifies his explanation. However, the degree of proof required by the revenue is only preponderance of probabilities as insisted upon in the civil cases and not ' prove beyond doubt ' which is insisted upon in criminal cases. 3. 11 When the assessee offers an explanation, notwithstanding the fact that the revenue has not proved this explanation as false, the assessee has further responsibility ' to substantiate ' his explanation. If he fails to substantiate his explanation, he shall be deemed to have concealed the particulars of his income. Here, in our opinion the phrase ' to substantiate ' will not mean to prove beyond doubt. The degree of proof required for assessment proceedings and penalty proceedings will be different. If the phrase to substantiate is interpreted to prove beyond doubt then the penalty will be compulsorily leviable in every case of addition/disallowance, which is not the intention of the Legislature. When, on preponderance of probabilities, the explanation given by the assessee is a plausible explanation, the assessee shall be deemed to have s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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