TMI Blog2005 (7) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was then completed under s. 143(1) on 5th Jan., 1989, on an income of Rs. 23,810. 4. The assessee is a yarn merchant doing business under the name and style as M/s Govindnath Vishwanath Tapadia, Malegaon, as sole proprietor. In the month of March, 1989, certain enquiries were conducted by the Investigation Wing of the IT Department in respect of the purchases of demand drafts by the yarn merchants including the assessee of Malegaon. It was noticed by the Investigation Wing that some demand drafts (DDs) purchased by the assessee were not recorded in the assessee's books of account and thus there was a pnma facie case of escaped income. Thereafter, on 30th March, 1989, the assessee filed one return of income declaring therein additional income of Rs. 3,26,970 on account of unexplained money utilized in the purchase of unaccounted demand drafts. The assessee also declared an additional income of Rs. 22,220 to cover up the omission of any income that might be resulted or earned by the assessee from the transactions of purchasing unaccounted demand drafts, which were utilized for the purpose of purchase of goods. The Department, therefore, issued notice under s. 148 on 2nd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the assessee to collect the information and to furnish its explanation. Hence, the amount was offered in the return of income filed on 30th March, 1989, which was filed voluntarily before issuing notice under s. 148 of the Act and as such, it was requested not to impose any penalty under s. 271(1)(c) of the Act. 5. After considering the explanation of the assessee, the AO imposed a penalty under s. 271(1)(c) by observing and stating as under: "I have carefully considered the assessee's submissions. The undisputed propositions relevant to the context of the facts of the recent case are that by filing revised return of income the assessee declared additional income of Rs. 3,26,970 on account of unaccounted demand drafts. Besides, he has also declared additional income of Rs. 22,222 to cover up the omissions, etc. The filing of revised return is certainly after the investigation made by the ITO (Inv.) regarding the purchase of unaccounted demand drafts. Once the assessee failed to explain satisfactorily the source and the nature of the purchase of drafts, it is not necessary for the Revenue to locate the exact source. The facts make it clear that it is a case of conceal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the Investigation Wing had detected concealed transactions as well as concealed income. (7) It is thus conclusively established and proved that the assessee did not file true and correct return of income originally and he was aware that his return of income filed originally did not show the correct income earned by him during the relevant period. (8) Admission of additional income in the return filed on 30th March, 1989, goes to show that the assessee had concealed its true income in the original return of income and furnished inaccurate particulars thereof. (9) Merely because the assessee had offered additional income in the re-assessment proceedings is not sufficient to show that no concealment of income was made by the assessee in the original return of income and as such penalty can be imposed. (10) The assessee has failed to prove that the additional income assessed in the reassessment proceedings was not concealed income of the assessee. (11) To impose penalty under s. 271(1)(c), it is no more necessary to establish mens Tea on the part of the assessee. 7. Being aggrieved with the order of the CIT(A), the assessee has preferred this appeal before us. 8. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the assessee failed to explain the source of investments in the drafts purchased by him that the assessee had no other alternative except to declare the same as undisclosed income. Therefore, the assessee's declaration cannot be taken as voluntary, but as a result of Departmental enquiry. It was further submitted that unexplained investment of the assessee in the purchase of demand drafts was detected by the Department. Hence, it us a clear-cut case where the assessee had concealed his income to that much amount which is disclosed covering the amount of demand drafts purchased by the assessee out of unexplained money. He further submitted that there are many decisions where it is held that as a result of enquiries carried out by the Department, if the assessee discloses additional income, then penalty under s. 271(1)(c) is leviable. These decisions were cited by the learned Departmental Representative in the written submissions filed before us. 10. We have heard both the parties and have gone through the orders of the authorities below. We have deliberated upon the relevant provisions of law as well as the various decisions cited at the Bar. 11. Admittedly, the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54,155.00 31-3-1987 1,68,000.00 10-1-1986 2,217.00 (shortfall in cash for purchase of DD) Amount of drafts 8,99,201.40" not included in financial yr. 1986-87 ------------------------------------------ On perusal of these details, it is clear that the drafts purchased on a single day are of a substantial amount and not of a nominal amount like Rs. 1,000 or Rs. 10,000 or so. A substantial amount is involved in purchasing these drafts. Having regard to the amount of drafts and having regard to the fact that the assessee's claim that these amounts were given by the villagers who are doing the profession of weavers, it is improbable to belief that if such huge amounts were given by these weavers to the assessee, the assessee would not know the names and addresses of such weavers. The assessee's case that the names and addresses of the weavers are not known and cannot be ascertained is very difficult to believe. It is the assessee's own case that the assessee has been doing its business regularly and earning commission on the purchases made for and on behalf of the weavers, but still the assessee has submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inasmuch as it is based on or is connected with the enquiry or investigation conducted by the Department wherein it was unearthed that these amounts were never recorded by the assessee in the books of account or sources thereof were never explained by the assessee. At this stage, it is also pertinent to note that the assessee himself has failed to prove the source for the acquisition of the demand drafts, which were ultimately offered for taxation. In the present case, the assessee has not been able to give any evidence to substantiate his explanation as to the receipt of money from the weavers for the purpose of purchasing the demand drafts or to substantiate the explanation that the goods were purchased by the assessee from the mill owners for and on behalf of the weavers and that the goods were ultimately delivered to them. No evidence as to the delivery of the goods by the assessee to the weavers was also furnished. 12. In the present case, the assessee simply stated that he has surrendered the income to buy peace. This type of explanation by the assessee can prevail but unless it is supported by some material it cannot be accepted. Otherwise, if this type of explanation is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's explanation unacceptable, noted that it had offered the amount of Rs. 93,000 as additional income and applying Expln. 1(B) to s. 271(1)(c) imposed the penalty on the assessee. The Tribunal cancelled the penalty, inter alia, for the reason that in the notice initiating penalty proceedings, the assessee was not intimated about the proposed action under Expln. 1(B) to s. 271(1)(c); but the High Court, on a reference, held that imposition of penalty was valid. On appeal to the Supreme Court, it was held by the Hon'ble Supreme Court, affirming the decision of the High Court, that the penalty Was validly levied. In the case on hand also, the assessee's explanation that the amounts were provided by the weavers and as it had delivered goods within short time no entries were made in the books of account in respect thereof has not been proved or established or substantiated by the assessee by any iota of evidence. This explanation of the assessee is not found to be bona fide or sustainable. 14. Now, coming to the assessee's contention that he has offered the additional income conditionally, we find that the assessee has led no evidence to show that the Department had ever agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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