2005 (1) TMI 66

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....confirming the order of the Appellate Assistant Commissioner holding that penalty cannot be levied solely on the basis of reasons given in the original order of assessment?" The assessee is a partnership firm. It is engaged in the business of purchase and sale of foodgrains. For the assessment year 1973-74, it filed a return showing an income of Rs. 31,390. It also introduced cash credit in the name of Shri Ladha Ram. On being asked by the Income-tax Officer "C" Ward, Karnal (hereinafter described as "the Assessing Officer"), the assessee filed a copy of Shri Ladha Ram's detailed account. The statement of Shri Ladha Ram was recorded on May 28,1974. He gave out that he had advanced loan of Rs. 15,000 out of sale of agricultural produce an....

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....ides agricultural produce with the assessee-firm. The creditor is aged 68 years of weak eyesight. The financial position of the creditor rightly shows that he was capable to advance money of Rs. 15,000 in 1973-74 assessment year and Rs. 3,000 in 1974-75 assessment year besides agricultural produce." The Assessing Officer did not accept the explanation of the assessee and treated the amount of Rs. 15,000 as its undisclosed income. On that basis, he passed an order dated January 9,1976, vide which he determined the income of the assessee at Rs. 44,452. The appeal filed by the assessee against the assessment order was dismissed by the Appellate Assistant Commissioner. Further appeal filed by the assessee was dismissed by the Tribunal vide i....

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....especially the statement of Ladha Ram dated May 28, 1974, and those dated October 29, 1975 and November 5, 1975, with his affidavit dated June 16, 1974, all that we find is that evidence which was enough for sustaining addition was not enough to sustain the penalty as it is trite law by now, as stated above, that what is enough for sustenance of quantum is not enough for levy of penalty. To our mind, it is nothing more than falsity of explanation. As a consequence of rejection of the same, the addition came to be sustained. The attempt of the learned Departmental Representative at this stage to introduce the Explanation while it was neither invoked by the Income-tax Officer nor agitated by the Revenue in the form of grounds of appeal before....

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....income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section." An analysis of the provisions reproduced above shows that the Explanation which was added to section 271(1)(c) by the Finance Act, 1964, creates a legal presumption that where the tota....

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....e Supreme Court 10 declared that the rule regarding burden of proof enunciated in CIT v. Anwar Ali [1970] 76 ITR 696 (SC) is no longer valid. Their Lordships further held: "Whether it is case of undisclosed or unexplained cash deposit or any other concealment the standard is the same. The principle enunciated in Anwar Ali's case that mere rejection of the explanation of the assessee is not sufficient for levying penalty no longer holds good and it is no longer necessary that the Department must go further and establish that there was conscious concealment of particulars of income or a deliberate failure to furnish accurate particulars. The cases to which the Explanation is attracted have to be decided in the light of the law enunciated in t....