TaxTMI 
TaxTMI 
2011 (3) TMI 579
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....spect of addition of Rs. 4,13,500 made on the ground of unexplained cash found during survey. (3) The ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the levying of penalty under section 271(1)(c) of the Act in respect of addition of Rs. 21,25,088 made on the ground of unexplained cash Creditors. 3. Facts in brief as emerged from the corresponding penalty order passed under section 271(1)(c) of the Income-tax Act, 1961 dated 3-3-2006 and the assessment order passed under section 143(3) of the Income-tax Act, 1961 dated 17-3-2004 for assessment year 2001-02 were that the assessee-company is stated to be in the business of discounting of cheques and drafts on commission basis. The assessee was subjected to survey under section 133A of the Income-tax Act, 1961 on 17-10-2000. Two business premises were under survey operation by the revenue Department. There are three reasons for invocation of the concealment proceedings. 3.1 First reason for levy of penalty was an amount of Rs. 8,85,000 found as cash at the business premises of the company. It was explained by one of the Directors as per his statement recorded on 17-1-2000 that since ....
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....h was added by the Learned Assessing Officer under section 69 of the Act treating as unexplained money of the assessee. The above addition was also confirmed by the Learned Commissioner of Income-tax (Appeals). We find that the assessee all along during the course of the survey, during the assessment proceedings, before the Learned Commissioner of Income-tax (Appeals) and before us also consistently explained that out of Rs. 8,85,001 Rs. 841079 was the amount payable by the assessee to three persons against cheque discounting which was though shown as payment in his cash book as the money was taken out of cash box but it was not actually handed over. We find that the lower authorities have not disputed the contention of the assessee to the effect that on the date of the survey payments of Rs. 8,41,079 to three different persons were entered in the books of account of the assessee. However, the Learned Assessing Officer has not accepted the explanation of the assessee on the ground that the assessee could not substantiate his explanation by filing confirmations from the said parties. The Learned Assessing Officer also opined that identities of said three parties were not established....
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....ortunity of hearing to the assessee. We order accordingly, In respect of balance amount of Rs. 43,922, the orders of the lower authorities are confirmed. Thus, the ground of appeal of the assessee is partly allowed for statistical purposes." 4. On hearing the rival submissions, as well as on perusing the relevant orders, once the admitted position is that out of the total disallowances, the above discussed addition was one of the ground for levy of the penalty, and part of the same has been restored back for re-adjudication, therefore, at present it is not judicious on our part to affirm the concealment penalty. It is pre-mature and undesirable to treat an amount as concealed amount which has not yet been fully established as an unexplained investment under section 69 of the Income-tax Act, 1961 in the hands of the assessee. With the result, the levy of penalty to this extent is directed to be reduced. Before we part with this part of this ground, we may like to clarify that the Respected Co-ordinate Bench has affirmed the addition of Rs. 43,922, therefore, the penalty to the said extent is hereby sustained. 5. The Second reason for levy of penalty under section 271(1)(c) of the ....
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....off from his bank account on 11-9-2000. In our considered view, the initial onus which was on the assessee was thus duly discharged by the assessee. Now it was upon the revenue to bring cogent material on record to show that why this Rs. 4,13,500 could not be available on 17-10-2000 out of the cash withdrawn from the bank account of Shri Arvindbhai I. Shroff of Rs. 9,10,000 on 11-9-2000. We find that the revenue could not bring any material on record to discharge the above burden which was on it. Thus, in our considered opinion, the addition was made on a wrong footing and the Learned Commissioner of Income-tax (Appeals) was not justified in confirming the same. We therefore, delete the addition of Rs. 4,13,500 and allow the ground of appeal of the assessee." 6. On hearing the rival submissions and in the light of the above reproduced paragraph No. 7 of the Tribunal's order, once the quantum addition stood deleted by the Respected Co-ordinate Bench "D" and the explanation of the assessee about the source of the said cash was found satisfactory, therefore, there is no reason to impose concealment penalty to the extent of the said amount. We hereby direct not to impose the penalty o....
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....ues are then deposited in the assessee's bank. After retaining the discounting commission, the balance amount is used to be paid in cash. It was either paid to the seller or trader who had received the cheque from the purchaser or the amount is used to be paid to a purchaser who intends to encash the said cheque or draft. It is worth to mention that in respect of crossed cheques the assessee has explained that while accepting the crossed cheques, the payments in cash were not made immediately but in those cases the payments used to be made after the cheque got cleared vide normal banking channel. Inter alia, it was explained that the assessee purchases the cheques or drafts for a lesser amount then the denomination of the cheque/draft and, therefore, the balance amount is offered as income under the head 'discounting commission'. It was also explained that since the transaction in each day is voluminous, therefore, the assessee usually do not retain the identification or the address of such customers. It was, further, elaborated that such a business transaction was in the nature of a cash counter of a business. On an average daily about 50 persons used to approach the assessee with....
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....d the rival submissions and perused the materials available on record. The Learned Assessing Officer observed that Rs. 21,25,088 was appearing as cash credit in the balance sheet of the assessee in the name of the 13 different parties. The Learned Assessing Officer asked the assessee to explain the genuineness of the cash credit by furnishing confirmation, address and material to show credit worthiness of these creditors. However, the assessee failed to furnish the details as called upon and therefore, the Learned Assessing Officer treated the same as unexplained income of the assessee by invoking the provisions of section 68 of the Act. On appeal, Learned Commissioner of Income-tax (Appeals) deleted the addition of Rs. 35,000 relating to three parties and confirmed the addition of Rs. 20,90,088 relating to balance 10 parties. Before us, the sole contention of the Learned Authorised Representative of the assessee was that as the assessee earns commission income at the rate of 12 paise to 25 paisa per 100 Rupees including bank commission, the lower authorities were not justified in adding Rs. 20,90,088 as unexplained cash credit. We find no merit in the above argument of the assesse....
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....hed the details, etc. of those alleged known parties. According to Assessing Officer, whether the amounts were "current liabilities or secured/unsecured loans" had no effect as far as the question of discharging of onus was concerned. Merely by changing the head of the account in the balance-sheet did not absolve the assessee of its statutory obligation of proving the genuineness of the amount as appeared in the books of account. With these reasoning, the levy of penalty was affirmed. 9.2 The Learned Authorised Representative Mr. J.P. Shah of the assessee contested that all the necessary details were very much before the Assessing Officer, hence it was not a case where any hidden amount of secret transaction was detected by the revenue Authorities. It was also argued that once it was an admitted fact that the transactions were duly recorded in the books of account and the income was disclosed based upon those very accounts, therefore, such a transaction could not be held as bogus transaction. The Learned Authorised Representative of the assessee has mentioned that the assessee has furnished the Audit Report and under the current liabilities in the balance-sheet the impugned amount....
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....able income then also he is liable of concealment of income and that addition or disallowance is also deemed to represent the concealment of income. It is worth to mention at this very juncture that a proviso just below Explanation-1 got omitted with effect from 10-9-1986 due to which the bona fides of the assessee got redundant. Now this Explanation has only two situations; one is where the assessee gives no explanation at all and the second is where the assessee gives an explanation, but the authorities have found the explanation as a false explanation. Generally, we have experienced that the assessee does offer an explanation. Therefore, the first limb of the explanation in most of such case has a very limited role to play . The second limb is about the question of falsity of an explanation. The falsity of a statement can well be considered as being more than a rule of evidence and once it is incorporated in the Act, therefore, naturally it is also to be considered as a rule of substantive law relating to the levy of penalty of concealment. As soon as the assessee offers an explanation, then a vital question has always been raised that who has to establish that the explanation a....
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....eby an explanation without supporting evidence has no force and such an explanation is nothing but merely a verbosity without any substance. (iii) The assessee has offered an explanation, may or may not be substantiated, but fails to prove that such explanation is bona fide, then also subject to the invocation of concealment proceedings. Meaning thereby a tax-payer has to come forward with a clean heart and to demonstrate that there was a reasonable cause or justified circumstances due to which the particulars furnished were found to be inaccurate however altogether not failed to offer an income for tax purpose. To conclude this thought, three steps are expected from the assessee; first one is to offer an explanation, second is to substantiate the explanation and third is to demonstrate that there was bona fide reason for the impugned fault. (iv) Up to this extent if the assessee has succeeded, then our understanding is that the last limb of Explanation 1(B) has already been covered by such an assessee i.e., "that all the facts relating to the same and material to the computation of his total income have been disclosed by him." 12. The summumbonum of the above....