TaxTMI 
TaxTMI 
2006 (1) TMI 160
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....g a notice on 31st May, 2001. After search, the said rough cash book recovered from premises of AN was compared with regular books of the assessee-firm which tallied. However, DDI made post-search inquiry under s. 131(1A) where regular books of accounts maintained by the assessee were produced. On page No.3 of assessment order, AO has given a finding that rough cash seized tallied with regular books of accounts. Books seized pertain to period 1st Oct., 1998 to 6th March, 1999 and it is the claim of the assessee that addition made on account of cash credit pertains to period after this date. Controversy about cash credit can be summarized as - the said AN used to carry cash to his residence at Kadodara from petrol pump for the purpose of depositing into bank leaving a nominal balance of about Rs. 2,000. Cash was deposited into bank account maintained at Surat. This entry was debited in the books through Silak account. Subsequently, it was found that partner has deposited more amounts in the bank account than the amount shown in the said Silak account. When asked, partner contended that he had raised certain loans on various dates, which were deposited on behalf of the firm, along wi....
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....t was seized from the premises of AN during the course of search under s. 132 was rough cash book and not other documents, which were tallied with regular books maintained by the assessee-firm. AO has accepted this fact, thereafter assessee produced corrected regular books of account before DDI while making inquiries where these corrections and insertions were noted. Material on the basis of which, addition has been made in block assessment was not found at the time of search, therefore, this addition should not have been made in block assessment at all. (ii) Assessment and penalty proceedings are separate and distinct and merely because addition has beep made, same cannot automatically lead to concealment proceedings. (iii) Plea about corrected books of account being not the seized material was raised before Tribunal at the time of hearing, which is evident from the order of the Tribunal at page Nos. 3 and 4 by following observations. 4. "In the course of appellate proceedings, it is submitted that assessee explained the discrepancy in best possible manner. Assessee also explained reasons for making erasing and overwriting in the books of account. Assessee filed confirmations....
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....TR (Guj) 435 : (2000) 245 ITR 488 (Guj) (iii) N.R. Paper & Board Ltd. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 234 ITR 733 (Guj) (iv) Dy. CIT vs. Shaw Wallace & Co. Ltd. (2001) 165 CTR (Ca1) 489 : (2001) 248 ITR 81 (Cal) (v) Malayil Bankers vs. Asstt. CIT (1999) 152 CTR (Ker) 443 : (1999) 236 ITR 869 (Ker). (vi) CIT vs. Ravi Kant Jain (2001) 167 CTR (Del) 566 : (2001) 250 ITR 141 (Del)." Though this legal issue was specifically raised before Tribunal in quantum proceedings, Tribunal did not address to this issue and confirmed addition by observations in para 19 and 20. Since Tribunal has not considered this legal issue in quantum proceedings, assessee has right to raise this in penalty proceedings which are separate and distinct. 6. Learned counsel for the assessee, thereafter, relied on the decision in the case of Smt. Mala Dayanidhi vs. Dy. CIT (2005) 92 ITJ (Bang) 270, wherein it is held that penalty under s. 158BFA(2) is not mandatory by following observations: "Search and seizure-Block assessment-Penalty under s. 158BFA(2)-Penalty under s. 158BFA(2) is not mandatory-If the assessee offers a convincing reason or if any reasonable cause is demonstrated for non-i....
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....irs. The AO found that the amount payable to contractors is not proved and, hence, addition was made. In our opinion, this addition also should not have been made under Chapter XIV - B as undisclosed income as nothing is found as a result of search. Penalty under s. 158BFA(2) is accordingly, not attracted for this item of addition also. Non-filing of appeal by the assessee before Tribunal cannot be viewed against the assessee so as to attract the penalty under s. 158BFA(2). No other income is treated as undisclosed. We accordingly, cancel the levy of penalty." 8. It was contended that provisions of s. 158BA are akin to penalty proceedings under s. 271(1)(c), and therefore, provisions are analogous to s. 271(1)(c) main clause to which Supreme Court judgment in the case of CIT vs. Anwar Ali (1970) 76 ITR 696 (SC), which laid down that burden to prove concealment is on the Department. In the instant case, assessee has furnished all the confirmations to the AO with their names and addresses. AO did not make any effort to issue summons to them. Assessee expressed his willingness to produce lenders, AO did not ask for it initially and when asked, gave only one day's time to produce ....
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....act of furnishing of inaccurate particulars-Expln. 1 does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee-Assessee did not satisfactorily explain the cash credits by producing evidence and documents-Neither the parties who are said to have advanced temporary loans nor the accountant who had allegedly arranged the loans was produced-Though the Department was justified in treating the cash credits as income of assessee there was nothing to lead to a reasonable and positive inference that the assessee's explanation was false-Circumstances do not justify imposition of penalty even by taking recourse to Expln. 1 to s. 271(1)(c)" (C) Nemichand vs. Asstt. CIT (Inv.) (2005) 93 TTJ (Bang) 564 for the proposition that- "Search and seizure-Penalty under s. 158BFA(2)-Scope and leviability-Sec. 158BFA(2) does not prescribe nature of offence for levy of penalty- Though an enabling provision, s. 158BFA(2) is silent about the circumstances attracting penalty-Being penalty provisions, they have to be strictly construed and being totally ambiguous, have to be construed in favour of the assessee-Proviso to s. 158BFA(2) enumerat....
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....11. We have heard rival submissions and perused material available on record. We shall take up merits of the case first. It emerges from the record that rough cash book found at the residential premises of the said AN was tallied with regular books of account maintained by the assessee-firm at the time of search. Subsequently, assessee produced its regular books of account before DDI in which some insertions, corrections were there, apropos which, explanation of the partner is that petrol pump was at village and cash was carried to Surat which was deposited in the bank by the partners together with loans. Accountant was not aware of these loans and wrote books accordingly. When the assessee came to know about these discrepancies, necessary entries were corrected in the cash book in place of writing new sets of books. One of the reasons may be, perhaps, that regular books of accounts were subject-matter of search proceedings. Assessee filed, confirmations of all the depositors, which contained names and addresses, in consideration of all these material, assessee furnished explanation in respect to corrections, insertions and cash credits. Assessee volunteered to produce creditors bu....