TMI Blog2000 (10) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... n offered by the assessee had 'a ring of a convenient excuse and not a ring of truth' ? 7. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in appreciating the different ratios of the Gujarat High Court judgments in the cases of Vinaychand Harilal [1979] 120 ITR 752 and Kantilal Manilal [1981] 130 ITR 411 ? 11. Whether on the facts and in the circumstances of the case, the Tribunal had any cogent material before it to arrive at the aforesaid findings and whether the same were not based on surmises and conjectures ?" 12. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in drawing an adverse inference as regards the facturn of not contesting the additions effectively in relation to the penalty proceedings especially in view of the ratio of the Supreme Court decisions in the case of Anwar Ali [1970] 76 ITR 696 and Khoday Eswarsa and Sons [1972] 83 ITR 369 ? 13. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee had furnished inaccurate particulars of the income to the extent of Rs. 90,000 and whether the said finding of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first before considering the judgment of the Tribunal against the assessee. In the course of assessment proceedings, the assessee was called upon to explain the genuineness of several squared up accounts in which credits ranging from Rs. 500 to Rs. 5,500 appeared and the total of such cash credits amounts to Rs. 90,000. The assessee expressed its inability to furnish any evidence in support of the genuineness of the accounts stating that the funds were procured as temporary loans by the assessee's accountant with whom, its relations got strained and for that reason, the assessee could not even furnish the addresses of the parties to enable the Income tax Officer to go into the genuineness of the loan transactions. From the order of the Assessing Officer imposing penalty, it appears that the above unexplained cash credits were treated as income of the assessee for the relevant previous year by recourse to section 68 of the Act, which reads as under : "68. Cash credits.--Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof. or the explanation .offered by him is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine, Curiously, the cash credits were not ever ledgerised and these were surreptitiously introduced in the cash book and the amounts were withdrawn before the close of the accounting year. Indeed, the basic facts are within the peculiar knowledge of the assessee itself and it cannot shift the primary burden to the Income-tax Officer by keeping mum. In my view, by not furnishing any evidence to substantiate the transaction in its books, the assessee has made a tacit admission of its guilt and, therefore, there is nothing more for me to establish that the assessee was guilty of furnishing inaccurate particulars of his income which has led to the concealment of the real income. I am, therefore, satisfied that the assessee is liable to a penalty in terms of the provisions of section 271(1)(c) in respect of the squared up accounts also. Incidentally, the case also falls within the mischief of the Explanation to section 271(1)(c) as it prevailed at the material time, inasmuch as the total income returned by the assessee was far less than 80 per cent. of the total income as finally assessed after giving effect to the order of the learned Commissioner of Income-tax (Appeals), Baroda. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh any particulars of a loan. In such a situation, although the additions may be justified under section 68, it would not be correct to infer that the difference between the income returned and the income assessed was due to any fraud or gross or wilful neglect on the part of the assessee. I feel that in this case the facts do not indicate even a slight suggestion of fraud such as would be there in other cases involving totalling mistakes or production of doubtful documents or furnishing of incorrect information. Thus, there is a later case in which the Gujarat High Court has upheld the levy of penalty under the Explanation to section 271(1)(c), i.e., in the case of Kantilal Manilal v. CIT [1981] 130 ITR 411. That was however a case of unexplained cash used in business where there was mistake in totalling in the books . and there were reasons which could suggest fraud, gross or wilful neglect. In the present case, therefore, the facts are similar to the case of Vinaychand Harilal [1979] 120 ITR 752 (Guj) mentioned above. Following the Gujarat High Court on this point, therefore, I feel that the levy of penalty is not justified either under section 271(1)(c) or under section 271(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the accountant who had procured these loans could not be produced because their relations were strained has the ring of convenient excuse and not the ring of truth. There is nothing more than the bald statement of the asses see to support. To a straight question put from the Bench to learned counsel as to what prevented the assessee from getting the summons issued to the accountant, the answer was that this would amount to leading additional evidence which was not necessary according to the decision of the case of S. P. Bhatt [1974] 97 ITR 440 (Guj). This is a brilliant on-the-spot reply but this is a typical lawyer's reply and not the reply of an innocent assessee. How would he know the legal position regarding the burden of proof under S. P. Bhatt's case [1974] 97 ITR 440 (Guj). Moreover, we do not agree with the argument that an overall view has to be taken regarding the total deposits explained by the assessee so as to explain the balance. Lack of proof regarding the balance would remain. It is perfectly possible that an assessee may tell part truth and part falsehood. Indeed most situations are of that kind. That brings us to the legal position as stated in the case of Vina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated above the entire conduct of the assessee, i.e., not getting the accountant to appear before the Income-tax Officer the surreptitious manner of getting the accounts passed by squaring them up, is such that it cannot be said that the Department sought to prove the charge merely on the basis of falsity of the explanation given by the assessee." On behalf of the assessee, learned counsel Shri R. K. Patel argued that merely because the assessee had lost in the quantum proceedings, it did not absolve the Revenue from proving in the penal proceedings by cogent evidence that imposition of penalty was justified. Mere rejection of the explanation of the assessee as false may be sufficient for adding the unexplained cash credit to his income but was not sufficient for levying a penalty under section 271(1)(c) of the Act. Reliance is placed on the decision of the Supreme Court in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705. On behalf of the assessee, it was further argued that recourse to section 68 of the Act could have been made to treat unsatisfactorily explained cash credits as income of the assessee to bring them to tax but the same could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 68 would justify imposition of penalty with the aid of Explanation 1 as it stood in the relevant assessment year or as it exists on the statute book at the time of passing the order of penalty under section 271(1)(c) of the Act. In the quantum proceedings, the explanation of the assessee in relation to the cash credits was not accepted and was found to be false. The accountant was not, produced and the explanation that relations with him are strained was also found to be an unjustifiable excuse. In the assessment, it was also taken into consideration that the assessee had tried to square up the credit entries to conceal the particulars of income. Only two credit entries were explained and regarding the remaining entries, there were no documents or evidence brought on record. The names of the parties from whom the temporary loans were obtained were not furnsihed. The question before us is whether the abovementioned facts which resulted in addition of the cash credits as income of the assessee in them selves, without any further evidence, are sufficient for imposition of penalty by recourse to Explanation 1 of section 271(1)(c) as it stood in the relevant assessment year or at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income and (ii) the circumstances must show that there was animus, i.e., conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. The Explanation has no bearing on factor No. 1 but it has a bearing only on factor No. 2. The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee, Alternatively treating the Explanation as dealing with both the ingredients (i) and (ii) above, where the circumstances do not lead to the reason able and positive inference that the assessee's explanation is false, the assessee must be held to have proved tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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