TMI Blog1990 (10) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- ------------------- ---------------- 75,000 14,721 19,400 ------------------- ---------------- 7. Scrap 5,500 ------------------- No confirmation for these loans was filed by the assessee during the course of assessment proceedings, except the confirmation of two parties at Sl. Nos. 2 and 4 above. None of them was produced before the ITO for examination. The ITO, therefore, concluded that proof of identity and capacity of the lender and genuineness of the transaction was not proved by the assessee. He, therefore, added the same to the income of the assessee and disallowed the interest thereon. Besides, the disallowance of aforesaid interest, he also disallowed the interest on certain unproved cash credits in earlier years. In assessment year 1980-81, he further added a sum of Rs. 5,500 on account of scrap value not disclosed by the assessee which, according to the assessee itself, was one per cent total consumption of stock of 953.464 tonnes and, sold at Re. 1. The assessments were stated to have been confirmed by the CIT(A). Copies thereof, however, are not filed by the parties. 3. For these additions and disallowances, the ITO levied penalty of Rs. 33, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income are not satisfied in this case and hence the ITO was not justified in levying the penalties in both the assessment years under appeal. The penalties imposed under section 271(1)(c) of Rs. 33,985 and Rs. 12,804 for the assessment years 1980-81 and 1981-82, respectively, are, therefore, cancelled. " 4. The learned Departmental Representative submitted that the cases of Anwar Ali and Khoday Eswarsa Sons relied upon by the CIT(A) were rendered under the 1922 Act and that they ceased to have application to the cases of penalties under section 271(1)(c) of the present Act in view of various Explanations inserted to section 271(1)(c) from time to time. He contended that the onus is no more on the Revenue to prove the concealment of the income. He further submitted that the Explanation inserted by the Taxation Laws (Amendment) Act, 1975, with effect from 1st April, 1976 was applicable to this case and since the assessee had offered no explanation at all and the explanation, if made, was neither substantiated nor bona fide, the amount disallowed or added to the total income is to be deemed to represent the income in respect of which the particulars have been concealed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) whereby the concealment was presumed in cases where the total income returned was less than 80 per cent of the total income assessed (reduced by the revenue or capital expenditure incurred bona fide but disallowed as a deduction). The concept of "deliberately furnishing of the particulars" was also dispensed with by deleting the word 'deliberately' after the word 'or' and before the words 'furnished inaccurate particulars of such income' in section 271(1)(c). The effect of 1964 amendment was that the burden which was hitherto on the Revenue was thrown upon the assessee to prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. This presumption was held to be rebuttable by the Supreme Court in the case of CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14. In other words, for 'deliberate act' of the assessee, the penalty was shifted to the 'gross or wilful neglect' of the assessee. The absence of gross or wilful neglect was to be proved by the assessee by bringing the material fact on record. It was held by the Supreme Court in the case of CIT v. K.R. Sadayappan [1990] 185 ITR 49 that the onus was rebuttable : the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is material for the purpose of addition of cash credits is that is contained under section 68, viz., satisfactory explanation as to the nature and source of amount found credited in assessee's books. Nature denotes character of receipt, viz. a loan, deposit, gift etc. The assessee has to further explain the source of such deposit. Courts have held in this connection that three things have to be proved by the assessee, viz., identity of the payer, his capacity to pay, and the genuineness of the transaction. If any of the three is unproved, the credit could be deemed as income of the assessee under section 68. Any such explanation given even in penalty proceedings is sufficient and the finding in the assessment order might not necessarily be the conclusive. The finding given in the assessment order would be relevant and admissible material in penalty proceedings, if it remains uncontroverted in penalty proceedings. See in this connection the decisions in the cases of CIT v. Goswami Smt. Chandralata Bahuji [1980] 125 ITR 700 (Raj.) and Banaras Textorium v. CIT [1988] 169 ITR 782 (All.). 9. To penalise for concealment the first deeming is that there must be a failure of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders in assessee's books are filed before us giving address of only one person, i.e., B.D. Gandhi, 13/16, Rani Sati Nagar, S.V. Road, Malad (W), Bombay, in whose name cash credits appeared in earlier year and in this only interest payment was claimed. The letter is silent about the disallowance of interest payment to all the parties. The assessee, however, filed a statement of interest payments alleged to have been made by account payee cheques on various dates drawn on State Bank of India, Byculla Branch, and in some cases deduction of tax also at source. As regards the scrap, the assessee stated in its letter dated 20th April, 1983, to the ITO that there was no sale of scrap during the year 1978-79 as there was not much of scrap of any value because during these years the scrap was only burada of mild-steel and CI castings (mostly dust). On these facts, in our opinion, no penalty should have been levied on cash credits at SI. Nos. 1 and 4, payment of interest and additions on account of the scrap sale. The assessee has furnished to the ITO all the facts relating to these items which were material for computation of total income of the assessee. The explanation given, though could ..... 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