TMI Blog2006 (8) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... Briefly stated the facts giving rise to the present reference are as follows: The applicant is a partnership firm carrying on the business of sarrafa and money lending/pawning. In the course of business of money lending, the applicant advanced loans to various parties and took deposits from various persons. During the assessment year 1980-81 the applicant had taken certain deposits. Except for a deposit of Rs. 19,000 in the name of one Bahadur Lal all other deposits were accepted by the assessing authority in the course of regular assessment proceedings. He, however, had added a sum of Rs. 19,000 under section 68 of the Act on account of unexplained cash credit. The addition was confirmed by the Commissioner of Income-tax (Appeals) as also by the Tribunal in appeal filed against the regular assessment order. The Income-tax Officer initiated penalty proceedings under section 271(1)(c) of the Act in the course of assessment itself. He imposed a sum of Rs. 17,280 as penalty. Feeling aggrieved the applicant preferred an appeal before the Commissioner of Income-tax (Appeals), Lucknow. The appeal was dismissed. Still felling aggrieved the applicant preferred a second appeal before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the applicant has concealed the income, the penalty has rightly been imposed. According to him, the decision of the apex court in the case of K.C. Builders [2004] 265 ITR 562 would not be applicable in the present case as it was in respect of the prosecution launched by the Revenue under section 276 of the Act. Likewise, the applicant cannot take any advantage by the decision of this court in case of Smt. Shashi Aggarwal [2005] 272 ITR 36 wherein the Tribunal had accepted the explanation offered by the assessees that they were under the honest belief that agricultural income was to be disclosed in the assessment year 1975-76 and there was neither any fraud nor any gross or wilful neglect and the burden which was placed upon the assessees by the explanation had been discharged. In support of his various pleas he has relied upon the following decisions: (1) CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC); (2) CIT v. C. Ananthan Chettiar [2005] 273 ITR 401 (Mad); and (3) Balwant Rai and Co. v. CIT [2005] 274 ITR 269 (All). Having given our anxious consideration to the various pleas raised by learned counsel for the parties, we find that in the assessment for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that he was personally going and collecting the same. 4. On the one hand, the appellant had been claiming that no interest was paid as the amount had been withdrawn within 3 months. When this statement was being given, the appellant's counsel was present who did not challenge the correctness of the same. In other words, they accepted this fact. All these things taken together amply show that the appellant had been giving explanations which were not substantiated by any cogent material or evidence. Rather, his explanations had been found to be completely false. The provisions of section 271(1)(c) read with Explanation 1(B) were operative with full force and the imposition of penalty justified. 5. It was under similar circumstances that the Punjab High Court in the case of CIT v. Sardar Stores reported in [1986] 20 TLR 22; held that the penalty was exigible. In the said case, certain cash credits were found in the books of the assessee. One of the creditors was produced in the penalty proceedings and his statement was found to be contradictory and false. On these facts, it was held that the penalty was exigible." On further appeal the Tribunal in paragraph 4 has upheld the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision is of no help to the applicant. In the case of National Textiles [2001] 249 ITR 125, the Gujarat High 10 Court had considered the case of imposition of penalty under section 271(1)(c) of the Act for the assessment year 1974-75. Additions of Rs. 80,000 and Rs. 90,000 were made by the assessing authority as unexplained cash credit. The Tribunal, however, upheld the addition of Rs. 90,000 only. Penalty proceedings were initiated. The Tribunal had deleted the levy of penalty. The Gujarat High Court has held that the provisions of section 68 permitting the Assessing Officer to treat the unexplained cash credit as income are enabling provisions for making certain additions, where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the Assessing Officer. However, the addition made on this count would not automatically justify the imposition of penalty under section 271(1)(c) by recourse only to Explanation 1 below section 271(1)(c). In order to justify the levy of penalty, two factors must co-exist, (i) there must be some material or circumstance leading to the reasonable conclusion that the amount does represent the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome not disclosed or a specific amount claimed as deductions has been disallowed. In making computation of total income where the income returned has been rejected by rejecting the trading results, finding some discrepancy in the books of account and substituting the same by an estimated figure, in the strict sense, can neither be said to be addition of any amount in the returned income nor disallowance of any amount as deductions claimed. The word 'amount' of which additions made or deductions disallowed also denotes reference to specific item of amount added or disallowed as deduction in contrast to substitution of altogether a new estimated sum in place of the income returned. It is a case neither of addition or disallowance but a case of substitution." The aforesaid decision is clearly distinguishable and is inapplicable on the facts of the aforesaid case. In the case of K.C. Builders [2004] 265 ITR 562, the apex court has held as follows: "One of the amendments made to the abovementioned provisions is the omissions of the word 'deliberately' from the expression 'deliberately furnished inaccurate particulars of such income'. It is implicit in the word 'concealed' that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther any fraud nor any gross or wilful neglect was accepted by the Tribunal and the penalty was deleted. In the present case, we find that the explanation offered by the applicant regarding deposit of Rs. 19,000 has been found to be false and it has already been treated as concealed income exigible for levy of penalty. In the case of Bharat Rice Mill [2005] 278 ITR 599, this court has held as follows: "Therefore, the word 'concealment' inherently carries with it the element of mens rea. The explanation offered by the applicant in the present case is bona fide and also stands substantiated specially when the closing stock of Ghuta rice and Kinki rice though omitted to have been disclosed in the previous year relevant to the assessment year in question have been voluntarily disclosed in the revised return filed by the applicant and which stocks have been bona fide disclosed by the applicant in the subsequent assessment year, i.e., 1982-83, and had also been subjected to tax in that year also apart from being subjected to tax in the assessment year 1981-82 by the reassessment order. Thus, in our considered opinion, the Tribunal was not justified in upholding the levy of penalty." ..... X X X X Extracts X X X X X X X X Extracts X X X X
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