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TMI Blog2006 (1) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... levant assessment year by invoking the provisions under section 271(1)(c) of the Income-tax Act, 1961 ("the Act" for short), on the ground, that though the assessee is the owner and in possession of high denomination notes of the value of Rs. 1,35,000, has not recorded the same in the books of account maintained by it and has failed to offer any explanation about the nature and source of acquisition of money and, therefore, the said amount is "unexplained money" and concealed income for the relevant assessment year. The levy of penalty is confirmed by the Commissioner of Income-tax (Appeals), by rejecting the appeal filed by the assessee against the order of penalty passed by the Income-tax Officer. The Income-tax Appellate Tribunal has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll found out to be in possession with the assessee, they had been reduced merely to scraps of paper and had no value in the market at all. That is why, the assessee was not ultimately able to get anything out of those high denomination notes. It is not the Department's case that as per the assessee's own version, the assessee had given a sum of Rs. 1,35,000 to the broker in Haryana sometime in November, 1977, the source of which was unexplained inasmuch as the transaction was outside the books of the assessee. Had the addition been made in that way, the Departmental case might have some leg to stand. However, the addition has been made in the instant case, in respect of the high denomination notes, which were tendered by the assessee to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceased to remain legal tenders and had thus become valueless and in that view, in cancelling the penalty of Rs. 95,000 levied under section 271(1)(c)?" In order to answer the aforesaid question of law, reference to section 69A of the Act requires to be made. Therefore, the said provision is extracted and the same reads as under: "Section 69A. Unexplained money, etc.-Where in any financial year the assessee is found to be the owner of any bullion, jewellery or other valuable article and such money, bullion, jewellery, or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of money, bullion, jewellery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the money, bullion, etc., may be deemed to be the income of the assessee. Under section 271(1)(c) of the Act, penalty is leviable, if an assessee has either concealed the particulars of his income or has furnished inaccurate particulars of such income. In the present case, the Income-tax Officer has levied a penalty in a sum of Rs. 95,000 on the ground, that, though the assessee was in possession of high denomination notes of the value of Rs. 1,35,000, the same is not recorded in the books of account maintained by him and the explanation offered by the assessee about the nature and source of acquisition is not satisfactory and, therefore, the amount found in the possession of the assessee is unexplained money in the hands of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in possession of unexplained money of Rs. 1,35,000 during the previous year relevant to the assessment year and this amount was added to the return of income filed by the assessee while completing the assessment for the assessment year 1978-79. The assessment order so passed is accepted by the assessee, may be in view of smallness of the tax quantified by the Income-tax Officer in spite of such addition. However, in the penalty proceedings, the assessee had contended that the addition made did not represent the concealed income, since on the date, when he was found to be in possession of the aforesaid amount, the same did not have any value in view of refusal by the Reserve Bank of India to honour the high denomination notes when they were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper and they could not be used as circulating medium in general use as the representative value and, therefore, it could not be said that the assessee was in possession of unexplained money, appears to us the correct, proper and reasonable conclusion. Therefore, the high denomination notes which were in the possession of the assessee as on January 24, 1978, cannot be said as "unexplained money", which the assessee had not disclosed in his return of income and, therefore, it would not warrant levy of penalty under section 271(1)(c) of the Act.Accordingly, the question of law referred for our consideration is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. Ordered accordingly. X X X X Extracts X X X X X X X X Extracts X X X X
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