TMI Blog1995 (11) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of ice, filed a return showing a loss of Rs. 2,207 for the assessment year 1969-70. However, during the course of assessment proceedings, the following additions were made : Rs. (i) Cash credits amounting to 9,300 (ii) Expenditure of capital nature debited to profit and loss account 23,390 (iii) Out of labour charges, donation and income-tax debited to profit and loss account 3,260 These additions were sustained in appeal. While making the assessment, penalty proceedings were initiated under section 271(1)(c) of the Income-tax Act, 1961 (for short, "the Act"). Before the Income-tax Officer, the argument was that even if the explanation offered by the assessee in respect of cash credits is not supported by satisfacto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as concealed income in his case. In the case of Sardar Harbans Singh, the other partner of the firm also, for the assessment year 1969-70 cash credits of Rs. 2,000 appeared in his capital account. The assessee could not offer any explanation regarding the nature and source of this deposit either before the Income-tax Officer or at the appellate stage. It is thus seen that appearance of unexplained cash credits in the case of the firm as well as the partners, mentioned above, is a common feature of this group. The assessee has failed to offer any evidence to prove the genuineness of the cash credits. The only conclusion, therefore, that can be drawn in this case is that the cash credit of Rs. 9,300 represents the concealed income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticulars in respect of it. . . .Of course, in regard to the nature o the expenses there has been a difference between the assessee and the Department. That does not mean that the disallowance of these expenses should be taken into consideration for finding out as to whether the Explanation to section 271(1)(c) is attracted. . . . We do not agree with the Departmental Representative that by claiming these expenses as deductions from the income, the assessee furnished any false particulars. It is another matter whether the claim was accepted or not. The rejection of a claim does not mean that there was any concealment made or any inaccurate particulars furnished. On merits, therefore, we hold that penalty provisions were not attracted. . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curate particulars of such income. . . ." Section 271(1)(c) of the Act as originally indicated was to the same effect. By the Finance Act, 1964, however, the word "deliberately" occurring in clause (c) was omitted and the Explanation above-mentioned was added. The rule laid down in Anwar Ali's case [1970] 76 ITR 696 (SC) was that it is for the Department to establish that the receipt of the amount in dispute constitutes the income of the assessee and that the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. If there is no evidence on record, except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. of the returned income. The Tribunal, therefore, clearly erred in holding that the onus was on the Revenue to prove that there was concealment on the part of the assessee and that the assessee furnished inaccurate particulars of income. In view of the Explanation to section 271(1)(c), a presumption arose that the assessee had concealed the particulars of its income or furnished inaccurate particulars of its income for the purpose of clause (c) of section 271(1). In view of the amendment made by the Finance Act, 1964, the case on hand will not be governed -by the case of Anwar Ali [1970] 76 ITR 696 (SC), but by a decision of the Supreme Court in CIT v. Mussadilal Ram, Bharose [1987] 165 ITR 14, in which the Supreme Court explained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n stands rebutted. In view of the abovesaid legal position, the Tribunal must record a clear and categorical finding whether any explanation of the assessee can be accepted and thereby it has discharged the onus laid upon it by law. The explanation of the assessee for the purpose of avoidance of penalty must be an acceptable explanation. It may not prove what it asserts to the hilt positively, but as a matter of fact materials must be brought on the record to show that what it says is reasonably valid. It is for the authorities whether they will accept or reject the explanation, but law enjoins upon them that they should be explicit in recording a finding on the point. Upon a perusal of the Appellate Tribunal's order, it appears that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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