TaxTMI 
TaxTMI 
1991 (6) TMI 113
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....is M/s Bharat Painsts & Hardware Store, Udaipur, which is registered firm deriving its income from the purchase and sale of paints and hardware goods. The assessee filed its return for the assessments year in question declaring an income of Rs. 34,012. During the assessments proceedings, the ITO noticed that there were a few entries in pencil in the cash book in the name of one Shri Sohan Lal Sirohya (for short Sirohia) which represented cash credit entries. There wee certain other entries also in which no names had been mentioned. Peak value of such amounts treated by the ITO (for short ITO) as unexplained money was Rs. 23,000 which was assessed in the hands of the assessee as its "income from undisclosed sources". The assessments order gave the details of those entries. The ITO also recorded the statement of the partner Shri Atam Singh on 18th March, 1980 and of the partner Shri Mahendra Singh on 31st March, 1981 and he also furnished an opportunity to the assessee for filing confirmation or production of Shri Sirohya vide order sheet entry dt. 28th March, 1981 for which the assessee expressed his inability as Shri Sirohya was out of Udaipur. The assessments was completed by the ....
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..... In the letter dt. 26th March, 1983, it was mentioned that the partner Shri Atam Singh, who looked after the affairs of the assessee firm had gone to Delhi as it was the month of March, that the creditor Shri Sirohya whom the assessee had been asked to produce for verification, was doing business at Bombay and that in such a short time, it was practically not possible to compel him to come for verification though often the assessee was writing to him to attend on the date separately and the assessee also filed confirmations and affidavit dt. 11th March, 1983 from Shri Sirohya. It was also said that at the stage of assessments, the assessee was not asked to produce the creditors. Lastly it was said that the assessee nowhere admitted that it had concealed the income. However, the ITO noticed that the confirmation and affidavit filed by Shri Sirohya were an afterthought. He took the view that the assessee's Act of surrendering cash credit before the AAC and the Appellate Tribunal clearly established that the assessee had acted deliberately in defiance law or acted in conscious disregard of its obligations in furnishing true particulars of its income. He, therefore, levied a penalty o....
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....as been quoted in para 2 of the impugned order of the learned Commissioner(A). The learned Commissioner(A) vide the impugned order dt. 4th Aug., 1987 cancelled the penalty. His conclusion was based upon the following findings: (i) That Shri Sirohya had reasonably stood the test of cross-examination by the ITO and had given proper explanation as to how he was in a position to have from time to time, the amount of money which he advanced to the assessee and which ultimately totalled to Rs. 23,000. (ii) That from the bank statement of Shri Sirohya, it was clear that he had started the bank account with a certain cash deposit of Rs. 20,000 on 5th March, thereafter bills of his contract work were credited in this account which were nearly Rs.75,000 and he had withdrawn the money gradually from the account and even on 14th Dec., 1977 there was in account a credit balance of Rs.5,960. (iii) That Shri Sirohya clearly state before the ITO that before starting the contract work, he had done some work at Bombay and that for a number of years he was getting a salary of Rs. 700 to Rs. 800 per month which was entirely saved since the expenditure on food, clothes and stay were full....
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....d Commissioner(A). 10. We have duly considered the rival submissions as also the above mentioned decision of the Calcutta High Court. The first position which does not admit of any dispute is that the mere fact that an addition was made by way of cash credit would not automatically attract penalty under s. 271(1)(C). Secondly, in terms of the decision of the Calcutta High Court in the case of P.B. Shah & Co. P. Ltd. it cannot be said that in the present case, the assessee had admitted that the amount of Rs. 23,000 represented its undisclosed income. In this connection it is relevant to note that no surrender was made before the ITO who adjudicated the point and came to the conclusion that the amount of Rs. 23,000 which represented the peak credit had to be taken as the unexplained cash credit. Before the learned AAC in appeal all that finds mention from the order of the AAC is that the assessee did not press the ground. Even before the Tribunal the ground was not pressed for the reason that the trading additions had been deleted. These materials do not support the proposition that at any point of time the assessee had admitted that the addition of Rs.23,000 represented its conce....