TMI Blog1997 (10) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... ay dt. 13th Aug., 1983 (August), the first floor of the house property at Athugar Street Nanpura, Surat admeasuring about 1512 sq. ft. purchased from Shri Jagdish Bhai for Rs. 3,76,121. An agreement to sale dt. 7th Oct., 1983." As per the entires so made in the diary the assessee purchased a house property from Shri Jagdish Bhai for a consideration of Rs. 3,76,121 but its value in her balance sheet as well as in wealth tax return for the asst. yr. 1985-86 was shown at Rs. 1,90,221. There was thus found a difference of Rs. 1,85,000. 4. During the course of search in the statement recorded under s. 132(4) the assessee failed to give necessary details about the property purchased and the party from whom it was purchased. She however admitted the ownership of the property and claimed to have shown it in her records. Shri Ratilal, husband of the assessee in the statement recorded under s. 132(4) claimed that the diary belonged to him but he also showed ignorance about the said entry made in the diary about the purchase of the property. The said entry was also not found to be recorded either in the hands of the assessee or in the hands of her husband Shri Ratilal. It is also mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the party from whom it was purchased. She, however, admitted that in her wealth tax return for asst. yr. 1985-86 the value of the house property purchased was shown at Rs. 1,90,221 correctly. When confronted with the entry made in the diary the assessee showed her ignorance and claimed that she did not know whose handwriting it was. She also showed ignorance about the party from whom the property was purchased. During the course of assessment proceedings she appeared before the AO on 5th Jan., 1990 and submitted that the said residential property was acquired out of her own resources. She also claimed that she is partner in the firm M/s Vijay Corpn. and was being assessed to tax for the last 20 years. She denied her handwriting and that of her husband in the said entry made in the diary. She also filed an affidavit dt. 4th Jan., 1990 reiterating the ownership of the property and denied having made any 'on money' payment in the purchase of the property. The AO also summoned and recorded the statement of Shri Jagdish Bhai, seller of the property. He denied having received any amount other than what was written in the sale document. He also emphasised that the statement of asser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd. Despite sufficient opportunity given by the AO the appellant has not been able to prove as to how the purchase consideration mentioned in details in the diary can be disbelieved. It is an established principle that the facts which are self-evident need no further proof. Considering the detailed narration given in the diary, the AO's action in adopting the purchase price of the flat at Rs. 3,76,121 stands confirmed. Considering the totality of the facts discussed in detail in the impugned assessment order, the addition of Rs. 1,85,900 stands confirmed". 9. The Tribunal dismissed the appeal of the assessee against the order of the CIT(A) on the issue for the reasons recorded in para 10 of the order dt. 9th March, 1992 in ITA No. 4249/Ahd/90. The Tribunal also deleted the addition made on protective basis in the case of her husband Shri Ratilal in its aforesaid order. The Tribunal has however referred the following questions of law arising out of the order of the Tribunal for the opinion of the Hon'ble Gujarat High Court in its order dt. 2nd Feb., 1993 in RA No. 422/Ahd/1992: 1. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. Balkrishna (1981) 21 CTR (Mad) 326 : (1981) 130 ITR 138 (Mad) 4. Bhagirath vs. CIT (1980) 19 CTR (MP) 289 : (1983) 139 ITR 902 (MP) 5. Banaras Textorium vs. CIT (1988) 67 CTR (All) 191 : (1988) 169 ITR 782 (All) 6. CIT vs. Khoday Easwarsa Sons (1972) 83 ITR 369 (SC) 7. CIT vs. Anwarali (1970) 76 ITR 696 (SC) The AO reiterating the facts recorded in the assessment order and those in the appellate orders held the view that the facts and material on records are strong enough to prove the explanation offered as false and therefore, the case is covered by cl. A to the Expln. (1) to s. 271(1)(c). The AO, therefore, imposed penalty at 200 per cent of the tax sought to be evaded on the concealed income of Rs. 1,85,900 which worked out to Rs. 2,12,834 vide his order dt. 8th Jan., 1991 made under s. 271(1)(c). 11. On appeal the first appellate authority considering the arguments advanced on behalf of the assessee noted that looking to the contents of the diary seized the reliance placed by the assessee in the judgment of the Hon'ble Supreme Court reported in (1970) 76 ITR 696 (SC), (1972) 83 ITR 369 (SC) and (1987) 168 ITR 705 (SC) is of no help. He also noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. He has further submitted that since in the show cause notice Expln. to s. 271(1)(c) was not invoked, burden was on the Revenue to prove concealment of income. The addition made on account of unexplained investment in the property was treated as deemed income under s. 69A but that would not automatically lead to inference that income has been concealed. There is otherwise no proof adduced by the Revenue to prove concealment of income and in the absence of any such evidence the penalty under s. 271(1)(c) could not be imposed and in support he placed reliance on the decision in the case of CIT vs. Dharamchand L. Shah (1993) 113 CTR (Bom) 214 : (1993) 204 ITR 462 (Bom), wherein it was found that penalty was imposed under s. 271(1)(c) merely on the ground that certain additions were made in assessment proceedings on agreed basis and since the AO failed to invoke provisions of Expln. to s. 271(1)(c) penalty was held not leviable. He also placed reliance on Tribunal decisions reported in (1994) 49 ITD 583 (Nag) and (1995) 54 ITD 694 (Mad). He further submitted that for levying penalty for concealment of income, conscious concealment has to be proved by the Revenue. He sought support i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consideration shown in the said entry of 13th Aug., 1983, is at Rs. 3,76,121. This in itself is contradictory. The agreement found at the time of search showed sale consideration at Rs. 1,76,121. There was no agreement found showing sale at Rs. 3,76,121 on search. According to the learned counsel the entry made in the diary was neither in the hand of assessee nor in the hand of her husband and whoever recorded such entry through a slip of pen he mentioned 3 in place of 1 in the figure of lakh. The explanation so offered is most plausible. Moreover, the party who sold the property has denied having received any amount over and above the consideration shown in the sale documents. The explanation so offered fully rebuts the presumption raised under the Explanation. 12.2 Arguing further, the learned counsel has pointed out that the CIT(A) confirmed the penalty by leading case law wherein penalty for concealment was sustained on the basis of Explanation inserted from 1st April, 1964. This Explanation has since been deleted w.e.f. 1st April, 1976 and new Expln. (1) inserted. However, the principles laid down by Courts in the case of Explanation inserted from 1st April, 1964, hold go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot able to substantiate. However, in respect of (B) there is proviso to Expln. (1) which provides that if the explanation is Bona fide and all facts and material to the computation of total income have been disclosed nothing contained in Expln. (1) shall apply. The assessee discharged the onus cast upon it. The assessee as well as her husband denied having given any 'on money' in respect of the property in the statements recorded under s. 132(4) itself. The statement recorded under s. 132(4) were spontaneous and were given without any kind of preparation. These statements should, therefore, be believed to be true particularly when the assessee and her husband gave similar statements about the property without any contradiction. 12.4 The learned counsel has also submitted that the presumption under s. 132(4A) does not apply to the assessee as the warrant of authorisation under s. 132(1) was in the name of her husband Ratilal. Even otherwise presumption under s. 132(4A) cannot be extended to penalty proceedings without independent enquiry connecting the information with guilty frame of mind as held by the Tribunal in the case of P.K.N. Narayanan vs. ITO (1994) 48 TTJ 125 (Coch) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988) 27 ITD 44 (Del) 5. Doon Roller Flour Mills (P) Ltd. vs. IAC (1989) 31 ITD 238 (Del) 6. Kishan Gupta vs. ITO (1989) 31 ITD 448 (Del) 7. V. Ramachandra Rao vs. ITO (1990) 33 ITD 650 (Hyd) 8. ITO vs. Kumar Metal Industries (1991) 36 ITD 261 (Bom) 9. Smt. Shanta Kumari vs. ITO (1991) 38 ITD 175 (Del) 10. Nuchem Ltd. vs. Dy. CIT (1994) 49 ITD 441 (Del) 11. Nathu Ram Co. vs. ITO (1994) 50 ITD 360 (Chd) 12. Diamond Trust Investment (P) Ltd. vs. Asstt. CIT (1994) 51 ITD 123 (Bom) 13. Ram Motors vs. ITO (1995) 54 ITD 542 (Del) 14. Eagle International Ltd. vs. Asstt. CIT (1996) 57 ITD 512 (Cal) 15. Anand Smart Co. vs. ITO (1994) 50 TTJ 611 (Hyd) 12.8 The learned counsel has also submitted that the Department made addition on account of 'on money' paid for purchase of property in the hands of the assessee in substantive basis and also in the hands of her husband, Ratilal, on protective basis. Penalty for concealment has also been levied in both the cases though in the case of the husband, penalty was levied only at the rate of 100 per cent of the tax sought to be evaded whereas in the case of the assessee penalty levied was at 200 per cent. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1989) 179 ITR 628 (P H); 3. Addl. CIT vs. Motisingh (1983) 29 CTR (MP) 330 : (1983) 144 ITR 133 (MP); 4. CIT vs. Shri Pavankumar Dalmia (1987) 66 CTR (Ker) 167 : (1987) 168 ITR 1 (Ker); 5. Badri Prasad Om Prakash vs. CIT (1986) 54 CTR (Raj) 399 : (1987) 163 ITR 440 (Raj); 6. D. Vaman Padmanabh vs. CIT (1952) 22 ITR 339 (Nag); 7. CIT vs. Anwar Ali (1970) 76 ITR 696 (SC); 8. CIT vs. Prathi Hardware Stores (1993) 111 CTR (Ori) 105 : (1993) 203 ITR 641 (Ori). The learned Departmental Representative further made a submission that the Expln. to s. 271(1)(c) has rightly been invoked and looking to the facts and case law cited the penalty levied is fully justified and the same requires no interference. 14. We have given considerable thought to the facts, material on records, rival submissions and also gone through the various papers and documents placed in the compilation to which our attention was invited during the course of hearing. Various decisions cited have also been perused. We find that the assessee was partner in the firms M/s Vijay Corpn., M/s Vijaykumar Nileshkumar and Nileshkumar Mohanlal and was receiving share income and also income from interest. She ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Jagdishbhai, one of the co-owners, for Rs. 3,76,121 as per agreement to sale dt. 7th Oct., 1983. The assessee at the time of search admitted and having purchased such property as per the sale document but she showed her ignorance about the consideration paid, date of purchase and the party from whom purchased. She also denied having paid any 'on money'. Her husband Shri Ratilal in his statement at the time of search also denied having paid any amount over and above the apparent consideration. The AO also examined Shri Jagdishbhai, one of the co-owners of the property, and he also denied having received any 'on money' beside the apparent consideration. The assessee as well as her husband Shri Ratilal when confronted with the entry made about the transaction in the diary denied any knowledge thereof and also denied having recorded the same in their own handwriting. It has also been admitted by the Revenue that the said noting was not made in the diary either by the assessee or by her husband. When required to explain the discrepancy between the sale consideration shown in the noting and that shown in the sale deed it was explained that the sale consideration as recorded in the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt at Rs. 3,76,121 in place of 1,76,121. It is also worth noting that the said noting about the purchase of the property was made in telephone-cum-diary which is meant to be kept alongside the telephone instrument and not at a secreted place. Had the assessee actually paid Rs. 3,76,121 against the sale consideration recorded at Rs. 1,76,121 in the agreement to sale and sale deed such noting could not have been made in telephone diary but would have been made on other papers to be kept secret. The diary was also not meant for keeping such records. The evidence of noting in the diary may be sufficient for making addition in the total income on account of unexplained investment but looking to the other material evidence available and also the circumstantial evidence it is not considered sufficient enough to hold the assessee guilty of concealment of income for the purpose of levy of penalty under s. 271(1)(c) of the IT Act. 17. As regarded the validity of penalty levied we find that the AO while initiating penalty proceedings under s. 271(1)(c) recorded his satisfaction about the concealment of income. However, in the show cause notice issued under s. 274 r/w s. 271(1)(c) the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation or offers an explanation which is found by the AO or the Dy. CIT(A) or the CIT(A) to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him." then the amount added or disallowed in computing the total income of such persons as a result thereof shall, for the purposes of cl. (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." It would be seen that the Explanation creates a legal fiction in certain circumstances to the effect that the assessee is deemed to have concealed the particulars of income or furnished inaccurate particulars of income in the circumstances set out therein and but for such a legal fiction it could never have been said that there was any concealment of income. The Explanation also shifts the burden of proof to the assessee. Therefore, when the Explanation is invoked by the AO in the penalty proceedings it is essential on the part of the AO to inform the assessee that penalty procee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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