TMI Blog1999 (9) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer. The Assessing Officer imposed penalty under section 271(1)(c) by treating certain additions mentioned in the penalty order as concealed income. In first appeal, however, the CIT (Appeals) confirmed the penalty with regard to addition of Rs. 1,32,000 and Rs. 1,02,000 only. The assessee being aggrieved, filed the appeal before the Tribunal. 3. During the course of assessment proceedings, the Assessing Officer found that the assessee has claimed deduction of Rs. 94.05 lakhs on account of payment of royalty to the Arunachal Pradesh Relief and Welfare (Charitable) Society. As per clause 5 of the agreement the amount of royalty to be paid was Rs. 85.80 lakhs per annum and an excess of 11% of the face value of the tickets printed in excess of 15 lakhs tickets per week. The Assessing Officer worked out the guaranteed royalty to Rs. 1.65 lakhs per draw. The 25th draw was cancelled on the request of the assessee as the Tamilnadu Government has levied sales tax on the sale of lottery tickets as well as on account of the practical difficulty, the assessee requested the Arunachal Pradesh Government to cancel the 25th draw and the same was accordingly cancelled also. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,000 made by the Assessing Officer was not contested by the assessee. The addition of Rs. 1,02,600 made by the Assessing Officer was confirmed by the CIT(A) as there was no evidence to show the genuineness of the credits. The Commissioner (Appeals) also confirmed the penalty in respect of this amount of Rs. 1,02,000. Even during the penalty proceedings, the assessee was not able to give satisfactory explanations, while confirming the action of the Assessing Officer, the Commissioner (Appeals) referred to the Explanation 1 to section 271(1)(c) of the Act. 6. It is argued by the learned counsel for the assessee that there is no concealment of income because the addition made by the Assessing Officer was in dispute. The addition of Rs. 1,32,000 made by the Assessing Officer was in dispute. During the course of hearing the assessee was asked to explain how the liability of Rs. 1,32,000 was under dispute against the assessee which was included in the total income and Rs. 2.97 lakhs claimed as deduction by the assessee. As regards, the deposit of Rs. 1,02,000 in the name of certain persons, the assessee has not produced any evidence to prove the genuineness of the deposits, it is stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e month of August, 1986 falls in the assessment year 1988-89 as the accounting year of the assessee is from 1st June, 1986 to 31st May, 1987. As per the copy of the statement of the income filed by the assessee for the assessment year 1988-89, the assessee has disclosed the amount of Rs. 2,97,000 in the return. Under these circumstances, we feel that the assessee cannot be held guilty of concealment of Rs. 1,32,000 because the matter regarding the payment of royalty on 25th draw was pending for settlement before the society and as soon as the matter was settled in August 1986, the assessee disclosed the income of Rs. 2,97,000 in assessment year and claimed as deduction for the assessment year 1985-86. Therefore, penalty under section 271(1)(c) cannot be imposed with regard to the amount of Rs. 1,32,000. 9. The Assessing Officer made an addition of Rs. 1,02,000 as the assessee did not produce any evidence or correct address of the concerned parties to prove that the deposits have been received from them, during the appeal before the CIT(A) or during the course of penalty proceedings either before the CIT(Appeals) or before the Assessing Officer. Under Explanation 1 to section 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ori.), the facts of the case were that the cash credits of Rs. 20,000 were found in the assessee's accounts. It claimed that a loan of Rs. 20,000 was obtained from Sri R.V.P. Ganapathi Rao on different occasions. The ITO examined the said Ganapathi Rao who admitted to have advanced the loan and explained that this amount was saved out of commission which he had earned as commission agent. According to him, the said amount was not kept in the bank because of an apprehension that, if the facts of his having the amount was known to his brother, he would have been forced to use the same in his brother's business which he did not want to do. The ITO did not accept the explanation and treated the amount as assessee's income from undisclosed sources by the application of section 68 of the Act. Proceedings under section 271(1)(c) were initiated in respect of the said addition. The addition made by the ITO was sustained by the AAC. The ITO imposed penalty of Rs. 10,000 under section 271(1)(c) after rejecting the assessee's explanation. It was claimed by the assessee before the ITO that the creditor having admitted the advance of loan, the burden placed on it has been discharged and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by him." Their Lordships further held at pages 648 to 650 as under: "A conspectus of the Explanation added by the Finance Act, 1964, and the subsequent substituted Explanation makes it clear that the statute visualised the assessment proceedings and penalty proceedings to be whole distinct and independent of each other. In essence, the Explanation (both after 1964 and 1976) is a rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts are within the special knowledge of the assessee. Section 106 of the Indian Evidence Act, 1872, gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessing Officer as to whether he can invoke the Explanation or not. Explanation I which primarily concerns the case at hand, automatically comes into operation when, in respect of any facts material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had offered an explanation which the taxing officer has considered to be false or the assessee has offered an explanation but not material or evidence to substantiate it, he shall be deemed to have concealed such income within the meaning of section 271(1)(c). A further condition was imposed with effect from September 10, 1986, with which we are not concerned. In the case at hand, the explanation of the assessee so far as the genuineness of credit of the lender was concerned was not accepted. The assessee's appeal before the AAC failed. It was observed that the assessee offered an explanation but no material or evidence to substantiate the same. The Tribunal came to a presumptuous conclusion that the assessee may have succeeded in the appeal had it come before the Tribunal against the addition. No basis or reason has been indicated for such conclusion. A narration of facts would go to show that the AAC and the Tribunal did not consider the case of the assessee keeping in view the new Explanation 1 applicable on and after April 1, 1976. By operation of the Explanation, the onus lay on the assessee and findings given at the time of assessment are relevant and have pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he I.T. Act, 1961, are enacted, neither the courts (nor the taxation authorities nor the Tribunal) can render them nugatory by adopting a fundamentally erroneous approach to the statutory scheme.... The submission of the revised return may, in given cases, be voluntary, but such a voluntary filing by itself does not lead to the conclusion that there was no intention on the part of the assessee to conceal his income when he filed the original return. That depends upon the facts and circumstances which throw light on the mental process of the assessee at the time of the submission of his original return. A subsequent conduct may be one of the factors which could be duly taken note of in the process of that difficult decision. However, mere filing of a revised return by the assessee at any time prior to the Department cornering the assessee in relation to a particular concealed income, would not be sufficient to exonerate the assessee from the penal consequences. The mere fact that investigation by the Department is a foot, though nothing tangible had come into the possession of the Department at any particular point of time, may induce a dishonest assessee to submit a revised retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash credits added to the total income are deemed to represents the income in respect of different particulars have been concealed, if the assessee fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false. Since in the case of the assessee, before us, no explanation has been offered, the cash credits in the name of four parties are deemed to concealed income and penalty is leviable under section 271(1)(c). The burden which lies on the assessee under Explanation 1 to section 271(1)(c) has not been discharged. 16. Similarly, in the case of Ganpatrai Gajanand , the Assessing Officer added to the total income of the assessee-firm, an amount of Rs. 69,900 by rejecting the explanation of the assessee as unsatisfactory. The Assessing Officer levied penalty under section 271(1)(c). The Hon'ble High Court held that there is no distinction between the income arising on account of section 68 and income earned otherwise. The income deemed by operation of law is also deemed to be the income vide Explanation 1 to section 271(1)(c) inserted by the Finance Act, 1964, w.e.f 1-4-1976. The assessee before us has not disclosed the address of the depo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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