TMI Blog2003 (2) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T.A. No. 1076 (All) of 1993 (Under section 271(1)(c) of the Income-tax Act, 1961): 4. This appeal by the assessee is filed on the following effective grounds of appeal: "1. Because the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in holding that penalty under section 271(1)(c) was justified and upholding the same. 2. Because the stray piece of paper alleged to be construable as Balance Sheet of some business, already stood adjudicated from the stage of the Hon'ble ITAT in the case of AOP in the following words : '11. The papers seized and referred to at serial Nos. 12 and 13 even if construable as balance sheets relate to 1971-72 and 1972-73 and neither have they been established to be in the handwriting of any of the three persons in question nor any connection has been established with them.' And on a due consideration of the said findings, the learned authorities below should have accepted the appellant's contention and should have deleted the penalty. 3. Because in any case and without prejudice to the aforesaid contention with regard to the major addition of Rs. 1,36,683, whole of the amount could not have been considered to be the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing assets during the financial year 1971-72 relevant to the assessment year under appeal, i.e., 1972-73: (1) Unexplained investment in pawned ornaments Rs. 689 (2) During the Search Operation carried out at the residential premises of Hiralal at Pokhra Bhinda on 25/26th November, 1976 the balance sheet as on Kartik Badi 14 of St. Year 2028 (18-10-1971) was found. The balance sheet is as under: Liabilities (Rs.) Assets (Rs.) Asharfi Lal 1,22,343 Sarrafa a/c 31,694 Bhagirathi Ram 1,31,032 Bhandati (Pawning) 1,39,738 Ram Kumar 2,708 Sarrafa 106 Laxmi Ram Kalwar 150 Ram Ashrey 399 Bimla Khata 3,420 2,518 336 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d investment in purchase of land and construction of house : Rs. 15,300 (4) Unexplained investment in the construction of house : Rs. 25, 500 -------------------- Rs. 1,78,172 say Rs. 1,78,170 -------------------- 7. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Income-tax Act vide assessment order dated 28th March, 1985. The action of the Assessing Officer was challenged before the CIT(A) and the Id. CIT(A) confirmed the addition on issue Nos. 1 and 2 in a sum of Rs. 689 and Rs. 1,36,683. However, CIT(A) reduced the unexplained investment of purchase of land and construction of house from Rs. 15,300 to Rs. 10,150 on issue No. 3. The Id. CIT(A), however, enhanced the addition on issue No. 4 with regard to unexplained investment in construction of house in a sum of Rs. 7,000 and the amount of Rs. 25,500 on issue No. 4 was enhanced to Rs. 32,500 vide order dated 9th February, 1987. The orders of the authorities below were challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Asharfi Lal and of the assessee. Ld. counsel for the assessee in second Paper Book has filed copy of the same. Ld. counsel for the assessee also filed copy of the order dated 9th December, 1982, passed by the Income-tax Appellate Tribunal, Allahabad, A-Bench, in ITA No. 451 (All.) of 1981 for the assessment year 1968-69 in the case of AOP, Hira Lal, Asharfi Lal and Bhagirathi Ram. Ld. counsel for the assessee argued that during the search in the house of Asharfi Lal, one balance sheet was found from Pokhra Bhinda Village. He has further argued that the Department treated the same as AOP. He has relied on the order dated 9th December, 1982 of the Income-tax Appellate Tribunal in the case of AOP and further argued that the Tribunal gave a judgment on the aforesaid balance sheet and status of the assessee. Asharfi Lal and Hira Lal had further argued that the Tribunal gave finding against the Department on both the issues. He has further argued that Asharfi Lal has denied having any business connection with Bhagirathi Ram in his statement. Therefore, such material cannot be used against the assessee for imposing penalty. Ld. counsel for the assessee further argued that the notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged balance sheets, there is no evidence that the assesses was doing any business. He has relied on Banaras Textorium v. CIT [1988] 169 ITR 782 (All.) and argued that different view could be taken in the penalty proceedings. He has further argued that no satisfaction has been recorded by the Assessing Officer in the assessment order while initiating penalty proceedings. He has relied on CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 (Delhi). 10. On the contrary, ld. D.R. argued that initial onus was upon the assessee to prove its case. Ld. D.R. relied on CIT v. Geo Sea Foods [2000] 244 ITR 44 (Ker.). Ld. D.R. further argued that the assessee concealed his income and did not disclose correct income to the Assessing Officer. The ld. D.R. relied on the findings of the authorities below and argued that quantum appeals have been decided against the assessee. The ld. D.R. relied on: CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC) CIT v. K.R. Sadayappan [1990] 185 ITR 49 (SC) Addl. CIT v. Irshad Ali [1992] 197 ITR 144 246 ITR 280 (sic) Om Prakash Gupta v. ITO [2002] 81 ITD 55 (Chd.) Ld. D.R. further argued that the assessee has not discharged his burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and have to be considered separately. The quantum proceedings and penalty proceedings are essentially different proceedings altogether. Hon'ble Supreme Court, in the matter of CIT v. Anwar Ali [1970] 76 ITR 696 on this proposition held that the penalty proceedings are penal in character. It is further held that it cannot be said that the finding given in the assessment proceeding for determining or concluding the tax is conclusive. However, it is a good evidence. Before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income. Hon'ble Allahabad High Court in the matter of Banaras Textorium's case held as under: "In the scheme of the Act, the proceedings for imposition of penalty, though emanating from proceedings of assessment, are essentially independent and a separate aspect of the proceedings which closely follow the assessment proceedings. Penalty proceedings are quasi-criminal. Findings given in assessment proceedings are certainly relevant and have probative value, but such findings are material alone and may not justify the imposition of penalty in a given case, because the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to rebut the presumption of concealment of income by cogent, material and reliable evidence. The assessee could prove from the facts and circumstances of the case that it was not a case of penalty and could shift his burden of proof upon the Department and then the Department will have to prove that it was a case of penalty on the facts and circumstances of the case. 18. In this case, after the search, the Department has initiated proceedings against the AOP in the name of Hira Lal, Asharfi Lal and Bhagirathi Ram and later by findings of the Income-tax Appellate Tribunal in the case of AOP vide order dated 9th December, 1982 such proceedings in the status of AOP were quashed. Hon'ble Supreme Court in the matter of Ch. Atchaiah's case held: "Under the present Act, the Income-tax Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By 'right person' is meant the person who is liable to be taxed, according to law, with respect to a particular income. The expression 'wrong person' is obviously used as the opposite of the expression 'right person'. Merely because a wrong person is taxed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee, as given in the assessment order is Mundera Bazar, Chauri Chaura, Gorakhpur. The same address is given everywhere in other orders also which clearly shows that the assessee had not been residing at the place of recovery of the balance sheet at Pokhar Bhinda. Therefore, there is no question of recovery of balance sheet at the residence of the assessee. We have also directed the parties to file statement of Asharfi Lal recorded on the date of search, ie., 26-11-1977. Copy of the same is filed before us. We have gone through the statement of Asharfi Lal made on 26-11-1976 at the time of search and seizure. He had denied his association with the assessee Bhagirathi Ram. He also denied any business connection with the assessee in the said statement. Thus, no adverse inference could have been drawn against the assessee from the statement of Shri Asharfi Lal. We have also gone through the order of the Income-tax Appellate Tribunal, Allahabad, 'B' Bench, dated 26th April, 1990 in I.T.A. No. 449 (All) of 1987 by which appeal of the assessee on quantum was decided. However, we find at internal page-22 of this order in which it is observed by Income-tax Appellate Tribunal "tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blished amongst Hira Lal, Asharfi Lal and Bhagirathi Ram (assessee). No handwriting of these persons was found on the alleged balance sheet. Accordingly, the Tribunal held that the same evidence is not relevant in the case of AOP. These findings of fact have become final between the parties. During the course of penalty proceedings the assessee has denied having any connection with the Balance Sheet found from the residence of Hira Lal during the course of search on 25-11-1976. No balance sheet was recovered from the house of the assessee. Therefore, assessee was not at all under any legal obligation to explain the recovery of the balance sheet from the house of Hira Lal for the purpose of imposition of penalty. 22. We may mention here that the Assessing Officer made the addition on issue Nos. 1 and 2 on the basis of recovery of the balance sheet as mere denial of the assessee was not enough. We do not approve the findings of the Assessing Officer. Assessee was not found in possession of any balance sheet. Therefore, under law he could not be asked to explain the recovery of the balance sheet during the course of penalty proceedings which was not recovered either at his instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer himself are modified by the CIT(A). Therefore, on such estimation no penalty should have been imposed by the Assessing Officer. 25. The fourth addition made by the Assessing Officer was with regard to the unexplained investment in construction of house which has been deleted by the Income-tax Appellate Tribunal, Allahabad, vide order dated 26-4-1990. Therefore, this addition could not be made basis for imposition of penalty. Therefore, the CIT(A) has clearly erred in confirming the penalty on this issue. 26. Ld. counsel for the assessee relied on the decision of Allahabad High Court, in the matter of S. Devendra Singh's case in which it was held "that the Explanation merely raises a presumption which is rebut-table. It merely shifts the burden of proof from the Department to the assessee. But when the question of concealment is decided on the evidence on record, the question of burden of proof becomes immaterial. The Tribunal has come to the conclusion that the "Omission to include Rs. 2,400 in the return was accidental and was not due to any deliberate design, it could be safely presumed that the presumption raised by the Explanation stood rebutted. The presu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AOP. Ld. counsel for the assessee further argued that it was issued prior to the order of the Income-tax Appellate Tribunal, in the case of AOP, dated 9-12-1982 referred to above. We have already indicated that the Income-tax Appellate Tribunal, Allahabad Bench, vide order dated 9-12-1982 has quashed the assessment in the status of AOP. These findings became final between the parties. The penalty under section 271(1)(c) was issued vide assessment order dated 28-3-1985. The details of the search and incriminating material are mentioned in the assessment order and on the basis of the identical facts and circumstances, it was stated in the assessment order that the main assessment is made in the case of AOP and the assessments in the protective measure are made in the case of Bhagirathi Ram, individual, and Asharfi Lal, Hira Lal, HUF. Hon'ble Delhi High Court in the matter of Ram Commercial Enterprises Ltd's case , after considering the judgment of the Hon'ble Supreme Court in the matter of CIT v. S.V. Angidi Chettiar [l962] 44 ITR 739 held : "A bare reading of the provisions of section 271 and the law Lald down by the Supreme Court makes it clear that it is the assessing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of search of his premises.' and on that basis, inter alia, held that the penalty was leviable. 3. Because the documents referred to by the authorities below stood already adjudicated from the stage of the Hon'ble I.T.A.T in the case of AOP and the learned Commissioner of Income-tax (Appeals) on a due consideration of the said adjudication should have held that the appellant had nothing to do with the business alleged to have reflected in the said documents and therefore he carried no obligation to file the return. 4. Because on a due consideration of the attendant facts and circumstance of the case, the authorities below should have held that the appellant was under no obligation to file the return and the same should have been held to be constituting reasonable and sufficient cause for not filing the return and no penalty should, therefore, have been levied." 33. According to the facts of the case, the assessee was to file his return of income under section 139(1) on or before 31st July, 1972. He filed the same on 9th April, 1981 in compliance to the notice under section 148. The Assessing Officer found that there was delay of 104 months and accordingly levied the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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