TMI Blog2001 (8) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... stated to be advances received for supply of goods. The Assessing Officer noticed the following suspicious features in respect of these advances:- (i) These advances were received by the concern, namely, M/s. Supreme Mechanical Electrical Engineering Works. But this concern did not have any land, building, machinery, electric connection or any basic infrastructure necessary to produce articles, namely, the hand-tools against which the advances were alleged to have been received. (ii) Some of the advances were stated to have been received on the form of M/s Chawla Products Corporation, Ludhiana, which is a non-existent firm. (iii) All the advances were received in cash, which was highly improbable. (iv) Shri Anil Chawla, was alleged to have booked orders for the assessee and had booked an order with a Bangalore firm on 1-10-81 and received Rs.8,000 as advance. On the same date he is alleged to have received an advance of Rs.9,000 from a Pondi chery firm, which was physically impossible to do so. (v) Shri Sandeep had allegedly booked an order for the assessee on 1-6-1981 at Bombay but on the same date he was supposed to have deposited cash collected from Delhi with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay, Bangalore, Madras, Pondicherry, etc. The Assessing Officer also took note of the fact that the assessee had not paid any amount by way of commission, travelling expenses, boarding and lodging to the agents. 2.2 The Assessing Officer also took note of the fact that the amounts covered by advances were in fact given to M/s Jindal Udyog by way of capital in which the assessee was a partner. The Assessing Officer, after taking note of these facts and also in the light of the judgment of Punjab Haryana High Court in the case of Hari Chand Virender Paul v. CIT [1983] 140 ITR 148, held that the assessee failed to establish the identity of the creditors, their capacity to advance the amounts and genuineness of the transactions. He, therefore, held that amount of Rs.4,08,300 introduced in the names of 51 parties in fact represented the undisclosed income of the assessee. Accordingly, the Assessing Officer made an addition of Rs.4,08,300 and also initiated penalty proceedings under section 271(1)(c). 3. Being aggrieved with the order of the Assessing Officer, the assessee took the matter in appeal before the CIT (A). During the course of appeal proceedings, the assessee took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he had, as an agent of the assessee, obtained advances from various parties against orders for supply of hand-tools etc. It was only when the assessee realised that he had no case before the income-tax authorities that he contended that the advances really represented the concealed income of the firm M/s Jindal Udyog. In view of these facts, we are of the considered view that the assessee is only trying to abuse the process of the Commission to get out of the difficult situation. We accordingly hold that having regard to the nature and circumstances of the case, this is not a fit case for admission. The application is accordingly rejected." 5. Thereafter, the Assessing Officer again decided the set-aside assessment on 28-3-1989 by making the addition of Rs.4,08,300, which was again disputed by the assessee before the CIT (A). The CIT (A) confirmed the addition made by the Assessing Officer vide his order dated 23-2-1990. Aggrieved further, the assessee took the matter in appeal before the ITAT. The ITAT confirmed the addition by recording the following findings in para 5 of its order dated 23-8-1993: "5. The contentions of the Departmental Representative have been very c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that application filed by M/s Jindal Udyog before the Settlement Commission was also rejected, the Assessing Officer held that the assessee had concealed the particulars of income and accordingly imposed penalty of Rs.2,59,653 @ 100% of the tax sought to be evaded. 7. Being aggrieved with the order of the Assessing Officer, the assessee took the matter in appeal before the CIT(A). It was contended before the CIT(A) that addition made in the hands of the assessee was covered by the intangible additions made in the hands of the M/s Jindal Udyog for the earlier years. However, this submission of the assessee did not find favour with the CIT(A) on the ground that money had not been introduced in the books of M/s Jindal Udyog; rather the same was introduced in the books of account of the assessee. If the amounts in question had really belonged to the firm M/s Jindal Udyog, the same should have been credited in their books of account. He also took note of the fact that amount of advances did not tally with the amount receivable from the firm. He further noted that the money was stated to have been withdrawn from the books of account of the firm and if the money actually belonged to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifting stand. Drawing our attention to page 90 of paper book, he submitted that additional income of Rs.60,000, Rs.1,40,000, Rs.1,30,000 and Rs.1,02,612 was offered/made in the hands of M/s Jindal Udyog for the assessment years 1979-80, 1980-81, 1981-82 and 1982-83 respectively. Therefore, the assessee was within his rights to raise an alternative plea at any stage of the proceedings. For this proposition he relied on the following judgments:- (i) CIT v. Ram Sanehi Gian Chand [1972] 86 ITR 724 (Punj. Har.); (ii) CIT v. Prem Chand Jain [1991] 189 ITR 320 (Punj. Har.); (iii) Addl CIT v. Ghai Lime Stone Co. [1983] 144 ITR 1402 (MP); (iv) CIT v. Kanshi Nath Dutta [1991] 188 ITR 225 (Cal.) (sic.); and (v) Anantharam Veerasinghaiah Co. v. CIT [1980] 123 ITR 457 (SC). 8.1 He further submitted that penalty proceedings and assessment proceedings are independent proceedings. Mere fact that addition made by the Assessing Officer has been upheld by the ITAT in appeal would not by itself justify levy of penalty under section 271 (1)(c). For this proposition, he relied on the following judgments:- (i) CIT v. Dharamchand L. Shah [1993] 204 ITR 462 3 (Bom.), (ii) CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing judgments:- (i) Dewan Enterprises v. CIT [2000] 246 ITR 571 (Delhi); (ii) D.M. Manasvi v. CIT [1972] 86 ITR 557 (SC); (iii) CIT v. S.V Angidi Chettiar [1962] 44 ITR 739 (SC); (iv) Padma Ram Bharali v. CIT [1977] 110 ITR 54 (Gau.); and (v) A.M. Shah Co. v. CIT [1999] 238 ITR 415 (Guj.). 8.4 He also drew our attention to page 5 of the penalty order passed by the Assessing Officer where he has mentioned that the assessee concealed particulars of income and filed inaccurate particulars. He submitted that the Assessing Officer was not sure whether the assessee had concealed the income or furnished inaccurate particulars. The Assessing Officer is dutybound to specify the default for which the penalty has been imposed. The same could not be levied for both the defaults. Lastly, he contended that if no benefit had been derived by an assessee by introducing an amount, no penalty could be levied. For this proposition he relied on the judgment of Madras High Court in the case of CIT v. Traders Traders [2000] 244 ITR 367. 9. The ld. D.R., Smt. Rachna Singh, on the other hand, vehemently supported the orders of the lower authorities. She vociferously argued that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to the conclusion that so-called advanced represented undisclosed income of the assessee, have been mentioned. She further submitted that these facts were duly taken into account by the CIT(A) in confirming the penalty. She also drew our attention to page 4 of the penalty order where the Assessing Officer has reproduced the finding recorded by the Settlement Commission in rejecting the application filed by M/s Jindal Udyog where Settlement Commission has recorded that the assessee had induced one Shri Anil Chawla to make a false affidavit averring that he had, as an agent of the assessee, obtained advances from various parties against orders for supply of hand-tools etc. It was only when the assessee realized that he had no case before the income tax authorities that he contended that the advances really represented the concealed income of the firm, namely, M/s Jindal Udyog. In the light of these facts the Settlement Commission has recorded "that the assessee is only trying to abuse the process of the Commission to get out of the difficult situation." She further drew our attention to ITAT's second order on pages 52 to 56 of the paper book, where in para 5 of the order, the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the finding recorded by the Assessing Officer in the penalty order, where he has held that the assessee has concealed the particulars of income and filed inaccurate particulars for which penalty under section 271(1)(c) has been imposed, the ld. D.R. submitted that the facts of the case are such where both the charges against the assessee stand proved. She submitted that both parts of section 271(1)(c), i.e., 'concealment of income' and 'furnishing inaccurate particulars of income' are not mutually exclusive. Relying on the judgment of Calcutta High Court in the case of Guru Prosad Shaw v. CIT [1944] 12 ITR 233, she submitted that notice under section 271(1)(c) could be issued at the time of completion of the assessment and since this was issued at the time of completion of the assessment, there was no illegality in initiating the penalty proceedings by the Assessing Officer. 9.2 She further drew our attention to last para of the CIT (A)'s order, where he has recorded a finding that the matter would be covered by the 1st Explanation to section 271(1)(c). In this case, the appellant had offered an explanation regarding the facts material to the computation of his total income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gments in Ram Sanehi Gian Chand's case, Prem Chand Jain's case, Ghai Lime Stone Co.'s case, CIT v. Kashinath Dutta [1989] 180 ITR 221 and Anantharam Veerasinghaiah Co.'s case. His submission is that this plea of the assessee has never been retracted at any stage thereafter. We agree with the submission of the assessee that the assessee can raise a legal submission at any point of time but this submission of the assessee has never found favour with any of the authorities, i.e. the CIT (A), the ITAT and even the Settlement Commission. No doubt the ld. Counsel has submitted that penalty proceedings and assessment proceedings are separate proceedings and the mere fact that addition has been made and sustained in appeal would not by itself justify levy of penalty. We agree with such proposition. But the question shall remains as to what further evidence or material has been placed by the assessee before any of the authorities to justify that though addition was warranted, yet penalty was not justified. In this case, there is not even an iota of evidence submitted by the assessee during the penalty/appeal proceedings. However, if the assessee desires to take benefit of intangible addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it cannot be laid down as a general proposition that any part of that fund must necessarily be regarded as the source of unexplained expenditure or investment. The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned undisclosed income during the relevant assessment year. The High Court has also held that it is for the assessee to establish existence of such a fund. In the present case, the assessee has not been able to lead any evidence to establish that additions made in the case of M/s Jindal Udyog by the Assessing Officer could be considered against the unexplained cash credits of the assessee. The assessee has not even filed copies of the assessment orders in the case of M/s Jindal Udyog where additions were made for the earlier years to establish the nature of additions. If the additions made in the case of M/s Jindal Udyog were such as would cover the unexplained expenses already incurred by that concern in the earlier years, no benefit for the same could be available to the assessee. However, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm. In any case, such plea was taken for the first time only before the CIT (A) in quantum appeal and such plea was not taken before the Assessing Officer during the assessment proceedings. The Settlement Commission has observed that it was only when the assessee realized that he could not explain the source of advances before the income tax authorities, the assessee took the plea that the amount in fact belonged to M/s Jindal Udyog. In view of the above reasons and the reasons given by the CIT (A), the ITAT and the Settlement Commission, we hold that the assessee is not entitled to any benefit of set-off of the additions made in the case of M/s Jindal Udyog to explain the unexplained credits of Rs.4,08,300. We, therefore, reject such submission of the assessee. 10.2 The next submission of the ld. Counsel for the assessee that if the assessee has not derived any benefit by introducing these amounts in his books, no penalty could be levied has already been considered. We are unable to accept the submission for the reason that by introducing these amounts in his books of account in the names of 51 persons as advances, the assessee has utilized the resultant money for investment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer has not recorded his satisfaction before initiating the penalty proceedings under section 271(1)(c). This submission has also been carefully considered. We find that at the time of completing the original assessment on 30-3-1985, the Assessing Officer had clearly recorded on page 6 that the amount of Rs.4,08,300 is added as undisclosed income of the assessee for which penalty proceedings under section 271(1)(c) have also been initiated separately. When the addition was taken in appeal before the Tribunal, the Tribunal set aside the order of the CIT (A) and restored the matter back to the file of the Assessing Officer with a direction to decide the issue afresh in accordance with the decision of the Settlement Commission on the application moved by the firm M/s Jindal Udyog. Since the application filed by M/s Jindal Udyog before the Settlement Commission was not admitted, the Assessing Officer completed the assessment on 28-3-1989 on a total income of Rs.4,28,880 as computed in the original order by taking into account all the facts already brought on record by the Assessing Officer while completing the original assessment. The Assessing Officer again issued a notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Counsel, the facts of the case were that the Assessing Officer had noticed a loan in cash totalling to Rs.30,000, whereupon the assessee surrendered the said amount to be treated as income of the previous year. Thereafter, the Assessing Officer initiated penalty proceedings under section 271D for accepting a loan of Rs.30,000 in cash in violation of the provisions of section 269SS and also under section 271(1)(c) in respect of income of Rs.30,000 surrendered by the assessee. In the light of these facts, the Hon'ble Delhi High Court held that once the amount of loan of Rs.30,000 was accepted as income by the assessee, there was no scope for the Assessing Officer to initiate penalty proceedings under section 271D because he had an option not to accept surrender made by the assessee. As regard the penalty under section 271(1)(c), the High Court cancelled the same on the ground that nowhere the Assessing Officer had recorded the satisfaction that the assessee had concealed the particulars of his income or furnished inaccurate particulars thereof. But the facts of the present case are clearly distinguishable. In this case, the Assessing Officer has extensively dealt with the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed in the preceding paragraphs coupled with the fact that the assessee has not adduced any evidence before any of the authorities to prove the genuineness of the credits of Rs.4,08,300 establish the charge of concealment of income against the assessee. This is further so that enquiries made by the Assessing Officer during the course of assessment proceedings, where letters addressed to all creditors were returned by the postal authorities unserved and inspector deputed by the Assessing Officer also reported that none of the parties were existing at the given addresses. Though the results of such enquiries were duly confronted to the assessee, but he made no efforts either during the course of assessment proceedings or during the penalty proceedings to prove his bona fide. It is no doubt true that both assessment proceedings and penalty proceedings are separate proceedings but the material gathered during the course of assessment proceedings is quite relevant for deciding the issue of penalty under section 271(1)(c). Even during the course of penalty proceedings, the assessee has not made any effort to lead any evidence than what was adduced before the various authorities during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(c) for concealment of income has been rightly imposed and sustained by the CIT(A). 10.7 Even if the penalty is considered for furnishing inaccurate particulars, the same would also hold good for the reason that in the books of account the assessee had shown receipts of Rs.4,08,300 in the names of 51 parties as advances. The assessee has miserably failed to prove that those advances were genuine. Therefore, it could be held that the assessee has also furnished inaccurate particulars in respect of income of Rs.4,08,300. Nowhere the assessee has made the submission that he has not furnished inaccurate particulars thereof. Therefore, even on this count, penalty under section 271(1)(c) could be leviable. 11. Before parting with the case we would like to mention that the CIT(A) has sustained the penalty by invoking Explanation 1 to section 271(1)(c). It is quite clear that while imposing penalty under section 271(1)(c), the Assessing Officer has not invoked Explanation 1 to section 271(1)(c). But their Lordships of Hon'ble Punjab Haryana High Court in the case of CIT v. Rajeshwar Singh [1986] 162 ITR 173, have held that Explanation 1 to section 271(1)(c) can be invoked for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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