TMI Blog1998 (5) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with Explanation 5(2) and, after giving an opportunity of being heard, Assessing Officer levied the impugned penalty. 3. On appeal, ld. CIT(A) deleted the penalty as follows:- "I have considered the rival submissions. The penalty has been levied under section 271(1)(c), read with Explanation 5(2). The provisions of Explanation 5(2) to section 271(1)(c) are not applicable in the present case because it is an admitted fact that no search warrant was issued in the name of the appellant and no Panchnama was drawn in her name. As stated by ld. ITO in the impugned order, 'the difference of Rs. 1,00,833 was surrendered by the assessee for buying peace'. Accordingly, it is clear that no concealment has been detected by ld. ITO. Reference is invited to the judgment of Pb. Hr. High Court in the case of Gumani Ram Siri Ram v. CIT [1972] 85 ITR 67. In this case, their Lordships were considering the issue of penalty, as to whether the surrender was a proof of concealment. It was held that an assessee could surrender for hundred and one reasons and not necessarily that there was concealment and that mere surrender could not lead to the proof of concealment. 2.5 In the light of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case. Accordingly, we are of the view that ld. first appellate authority ought not have deleted the impugned penalty. His order is, therefore, reversed and that of the Assessing Officer levying penalty is restored. 6. Appeal succeeds. Per Bali- I have very carefully gone through the proposed order of my ld. brother dated 27-5-1997 wherein he has reversed the order of the ld. CIT(A) deleting the penalty of Rs. 81,082 levied by the Assessing Officer under section 271(1)(c) for assessment year 1987-88, thereby restoring the order of the Assessing Officer imposing the penalty, but I am unable to agree with the reasoning as well as conclusion arrived at. 2. Briefly the facts are that the assessee Smt. Lajwanti Devi w/o Shri Om Parkash, an individual, filed a return of income on 27-10-1989 showing an income of Rs. 24,630 which was revised on 29-11-1989 disclosing an income of Rs. 1,25,463. The total income assessed amounted to Rs. 1,25,463 vide assessment framed under section 143(3) on 4-12-1989. 3. A search and seizure operation under section 132 was carried on, on 16-5-1986 at the residential premises of Shri Om Parkash, husband of the assessee, in a portion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e alongwith her husband late Shri Om Parkash, were not normally residing in the house belonging to Shri Bhagwan Dass and in fact they were residing at their own house situated at Club Road, Sangrur. It appears that the search warrant was issued only in the name of Shri Om Parkash and it was not in the name of Smt. Lajwanti Devi, the assessee. The Assessing Officer while passing the assessment order in her case on 4-12-1989 has observed that the cash available with the assessee as on 31-3-1986 as per balance-sheet was Rs. 1,45,162 against which cash found from the assessee was Rs. 2,45,995. Thus there was a difference of Rs. 1,00,833 which was surrendered by the assessee in the revised return filed on 29-11-1989 "for buying peace". The assessee while filing the revised return stated that her husband was not keeping good health and was suffering from Cancer and ultimately expired on 22-12-1987. She herself was under medical observation and in September 1987 while under treatment at Dayanand Medical College and Hospital, Ludhiana, it was detected that she was also suffering from Cancer and it was under these circumstances, to avoid long drawn litigation, she surrendered the difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncealment and that mere surrender could not lead to the proof of concealment. 7. Aggrieved with the order of the ld. CIT(A), the Revenue filed appeal which according to my ld. brother is required to be allowed in terms of his proposed order which to my mind is not justified in the facts and circumstances of the case narrated above and my reasoning for that is as under. 8. Admittedly, Explanation 5(b)(2) to section 271(1)(c) is not applicable in this case as no search warrant was issued in the name of the assessee nor any panchnama was prepared in her name. The Assessing Officer while levying the penalty has not specifically invoked any other Explanation, namely, Explanations 1 to 4 to section 271(1)(c) at the time of initiation of proceedings nor he has referred to any of the Explanations 1 to 4 to section 271(1)(c) at the time of levy of penalty. As such, the question of levy of penalty has to be adjudicated on the interpretation of substantive provisions of section 271(1)(c) as held by the Hon'ble Bombay High Court in the cases of CIT v. P.M. Shah [1993] 203 ITR 792 and CIT v. Dharamchand L. Shah [1993] 204 ITR 462/70 Taxman 414. 9. The fact that the assessee has surrendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d over the years on account of gifts and savings. The conclusion of my ld. brother that there is clear contradiction in the two statements of the assessee and nothing has been proved to establish the source of unexplained cash found at the time of search and seizure, is not factually correct as the assessee did give an explanation about the cash found, part of which, even according to the ITO, was as per the balance-sheet of the assessee as on 31 -3-1986 amounting to Rs. 1,45,162. About the balance cash, the explanation was that it was accumulated over the years on account of savings from household expenses or gifts received by her from friends and relatives on festive occasions and births of two sons and a daughter spread over a long period of time. Further my ld. brother in the proposed order while upholding the levy of penalty by the Assessing Officer has held that "mere surrender 'to buy peace' would not absolve the assessee from levy of penalty until or unless concrete material or evidence is brought on record to rebut the charge". From the above it appears that my ld. brother is of the view that in penalty proceedings, the onus is on the assessee to prove that he has not conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case briefly stated are that search operations were conducted by the Income-tax Department under section 132 on May 16, 1986 on the residential premises of the assessee at Club Road, Sangrur. The assessee lived with her husband Shri Om Parkash in this house and the warrant of authorisation was issued in the name of the assessee's husband. Another warrant of authorisation was issued against Shri Bhagwan Dass, father-in-law of the assessee, for searching the residential premises at Sunami Gate, Sangrur. The assessee's husband, late Shri Om Parkash, was one of the sons of Shri Bhagwan Dass. However, he did not reside with his father in this house, though, some portion of the residential house at Sunami Gate, Sangrur was under the control of Shri Om Parkash and the same was found locked during the search operations. The assessee was called upon to unlock the said portion which was duly complied with. The statement of the assessee was recorded before commencing the search of the residential portion in the Sunami Gate house. A sum of Rs. 2,45,995 was found in cash during the search operation in the portion occupied by Shri Om Parkash. The Assessing Officer treated an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for the marriage of my daughter. The statement about the sources of this amount as given previously is the correct one." 4. The assessee filed the return of income for assessment year 1987-88 on 27th Oct., 1989 disclosing total income of Rs. 24,630 which comprised 1/4th share of rent from shop-cum-flat No. 19, Sector-26, Chandigarh as well as interest on National Savings Certificates. The assessee filed a revised return on 29-11-1989 showing total income of Rs. 1,25,463 which included, inter alia, an amount of Rs. 1,00,833 being the difference between the cash found in the assessee's portion and the cash in hand as reflected in the balance sheet as on 31st March, 1986. The revised return is accompanied with a covering letter dated 29-11-1989 explaining the circumstances for surrendering the amount of Rs. 1,00,833 by the assessee. The relevant portion of the letter reads as under:- "Due to the search operation at the house of my husband I was in a very confused state of mind. I was also not maintaining good health as F.O.A. had been detected which ultimately lead to an operation in September 1987 in Daya Nand Medical College and Hospital, Ludhiana when it was also detected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial Member proceeded on the basis of the premise that the onus lay upon the assessee to prove the source of unexplained cash of Rs. 1,00,833 found during the search. 7. The ld. Accountant Member in his dissenting order held that since no search warrant had been issued in the name of the assessee nor any Panchnama was prepared in her name. Explanation 5 to section 271(1)(c) would not apply. The ld. Accountant Member further observed that since the Assessing Officer while levying the penalty has not specifically invoked any other Explanation, namely, Explanations 1 to 4 to section 271(1)(c), nor he has referred to any of the said Explanations while levying the penalty, the question of levy of penalty has to be adjudicated on the interpretation of substantive provisions of section 271(1)(c). In support of this view, reliance has been placed on the decisions of the Bombay High Court in the cases of P.M. Shah and Dharamchand L. Shah. The ld. A.M. further held that since the surrender has been made by the assessee with a view to buy peace and keeping in view the adverse personal circumstances of the assessee on account of death of her husband by cancer and the assessee herself bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of the search, he shall for the purposes of section 271(1)(c) be deemed to have concealed his income. It is well-settled that in penalty proceedings, the norms applicable are founded on criminal law. It is a cardinal principle of interpretation of statutes that penal statutes are to be construed and applied strictly. Explanation 5 would be applicable only in cases where assessee has been subjected to search operation under section 132. Assumption of jurisdiction under section 132 by the CIT is founded on statutory conditions as stipulated under section 132(1). Issue of warrant of authorisation under section 132(1) against an assessee leads to the search operations at the premises specified in the warrant and culminates in the seizure of, inter alia, unexplained assets, if any, and drawing up of the Panchnama in respect thereof. Search under section 132 on the assessee's premises is thus the basic statutory requirement for invoking the deeming fiction contained under Explanation 5 to section 271(1)(c). In the instant case, the facts are undisputed and which are to the effect that no search warrant has been issued in the name of the assessee and there was thus no occasion for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saged by the aforesaid clauses, deeming fiction would come into play and the amount added in the total income would be deemed to represent the income in respect of which particulars have been concealed. 12. The aforesaid Explanation introduced w.e.f. 1-4-1976 enacts a rule of evidence which has the effect of shifting the burden of proof on the assessee and the principles laid down in Anwar Ali's case would obviously not be applicable with full force. However, it has to be borne in mind that the introduction of Explanation does not alter the intrinsic character of penalty proceedings being quasi-criminal in nature. It is a cardinal rule of interpretation of statutes that penal proceedings are to be strictly construed. The burden of proof, which prior to 1-4-1964 lay upon the Department, shifted to the assessee by virtue of the deeming fiction introduced by the Explanation. It is well-settled that the degree of proof required for proving a negative fact would not be as heavy as required for proving a positive fact. In the case of proving a negative fact, the test of preponderance of probabilities would apply. If the assessee is able to furnish a bona fide and plausible explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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