TaxTMI 
TaxTMI 
2003 (2) TMI 150
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.... take up I.T.A. No. 1076 (All.) of 1993. I.T.A. No. 1076 (All) of 1993 (Under section 271(1)(c) of the Income-tax Act, 1961): 4. This appeal by the assessee is filed on the following effective grounds of appeal: "1. Because the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in holding that penalty under section 271(1)(c) was justified and upholding the same. 2. Because the stray piece of paper alleged to be construable as Balance Sheet of some business, already stood adjudicated from the stage of the Hon'ble ITAT in the case of AOP in the following words : '11. The papers seized and referred to at serial Nos. 12 and 13 even if construable as balance sheets relate to 1971-72 and 1972-73 and neither have they been established to be in the handwriting of any of the three persons in question nor any connection has been established with them.' And on a due consideration of the said findings, the learned authorities below should have accepted the appellant's contention and should have deleted the penalty. 3. Because in any case and without prejudice to the aforesaid contention with regard to the major addition of Rs. 1,36,683, whole of the amount could ....
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....re and source of acquisition of following assets during the financial year 1971-72 relevant to the assessment year under appeal, i.e., 1972-73: (1) Unexplained investment in pawned ornaments Rs. 689 (2) During the Search Operation carried out at the residential premises of Hiralal at Pokhra Bhinda on 25/26th November, 1976 the balance sheet as on Kartik Badi 14 of St. Year 2028 (18-10-1971) was found. The balance sheet is as under: Liabilities (Rs.) Assets (Rs.) Asharfi Lal 1,22,343 Sarrafa a/c 31,694 Bhagirathi Ram 1,31,032 Bhandati (Pawning) 1,39,738 Ram Kumar 2,708 Sarrafa 106 Laxmi Ram Kalwar 150 Ram Ashrey 399 Bimla Khata 3,420 2,518 336 927 12,866 Cash 64,168 ------------ ------------ 2,56,233 2,56,233 ------------ ------------ Profit (Munafa) Sarrafa profit 26,991 Asharfi Lal Exp. 13,775 Inst. 26,788 Bhagirathi Ram 5,650 Profit 489 ----------- 54,268 Share of profit Asharfi Lal 27,134 Bhagirathi Ram 27,134 ---------- 54,268 ---------- 2. From the scrutiny of the balance sheet, it was found that the assessee's capital account speaks the credit balance of Rs. 1,31,032. The assessee had incurred the expenditure of....
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....ent in construction of house was deleted. On facts and circumstances, the Assessing Officer issued notice under section 271(1)(c) of the Income-tax Act and, after considering the reply of the assessee and the previous proceedings, imposed the penalty under section 271(1)(c) vide order dated 24th August, 1987. 8. The penalty order was challenged before the CIT(A) and the ld. CIT(A), after considering the facts and circumstances and the reply of the assessee, held that although assessee denied the aforesaid investment, yet he did not lead any evidence to substantiate his claim. The ld. CIT(A) further held that the papers found at the time of search clearly indicated his investment and profit in the business. Therefore, there is no scope for accepting the contention of the assessee based on denial only. CIT(A) accordingly dismissed the appeal of the assessee vide impugned order dated 25th March, 1999. We may mention that none appeared before the CIT(A) on behalf of the assessee at the time of disposal of the appeal against the penalty order. The assessee felt aggrieved with the penalty orders of the authorities below and filed this appeal on the effective grounds of appeal incorporat....
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....hed. Ld. counsel for the assessee relied on CIT v. M.K. Gupta [1978] 113 ITR 473 (All.) and argued that in penalty proceedings, assessment proceedings or order could have been challenged. Ld. counsel for the assessee further argued that penalty notice could not be issued to the individual as the Department issued initially for AOP. He has further argued that if the Department was in dilemma about the status of the assessee, then how the assessee could be expected to know the legal implication. Ld. counsel for the assessee further argued that though appeal of the assessee was partly allowed on quantum by the Income-tax Appellate Tribunal, yet opening balance in the financial year shown in the balance sheet could not be treated as unexplained investment. He has further argued that the two aspects, i.e., opening balance and the profit earned during the year could not be taken together. He has further argued that the assessee is stated to be working for the last 15-16 years, therefore, no addition of the investment of Rs. 1,09,549 could be made. He has further argued that two balance sheets are stated to have been recovered. Therefore, investment could not be done in one year in view o....
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.... to be decided on preponderance of probabilities. He has argued that CIT(A) passed his order on quantum as AOP, he has argued that penalty was imposed with regard to unexplained investment in a sum of Rs. 10,150 only on estimated basis. He has relied CIT v. S. Devendra Singh [1997] 108 ITR 314 (All.), CIT v. Ishtiaq Hussain [1998] 232 ITR 673 (All.), Pandit Govind Prasad Mishra v. CIT [1999] 238 ITR 338 (All), and Motilal Padampat Sugar Mills Co. Ltd v. State of LIP [1979] 118 ITR 326 (SC). 12. We have considered the rival submissions and material on record. 13. We have already indicated in the facts of the case that on quantum the additions of issue Nos. 1 and 2 have been confirmed by the ITAT, Allahabad Bench, vide order dated 26th April, 1990 in ITA No. 449 (All) of 1987. On issue No. 3, the CIT(A) has partially reduced the unexplained investment in the purchase of land and construction of house. However, ITAT, Allahabad Bench, has deleted the entire addition on issue No. 4 in respect of unexplained investment in the construction of house. Therefore, the findings on the quantum have become final against the assessee on issue Nos. 1, 2 and 3 only and, as such, no penalty could ....
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....not a return in accordance with the provisions of the Act and the Rules and the Income-tax Officer should not have persisted in computing the total income of the assessee on the basis of that return. The Tribunal was right in holding that the earlier return filed by the assessee was liable to be ignored and so the penalty was not imposable." Hon'ble Allahabad High Court in the matter of Ishtiaq Hussain's case held as under : "The degree of proof necessary under the Explanation to section 271(1)(c) of the Income-tax Act, 1961, is that as in a civil suit, viz., preponderance of probability. The Explanation merely raises a rebuttable presumption which could be discharged in a given case by pointing out the factors and materials in favour of the assessee. It is settled that the findings given in assessment proceedings would be relevant and admissible materials in penalty proceedings, but those findings cannot operate as res-judicata because the considerations that arise in penalty proceedings are different from those in assessment proceedings." ** ** ** "Held, that the Tribunal had recorded a categorical finding that on the evidence led by the assessee it could not be said that on ....
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....whether the assessee has been able to discharge his initial onus or whether the assessee has been able to shift the burden of proof upon the Department. We will have to consider independently whether the facts and circumstances of the case would justify that it was a case of penalty against the assessee even though additions are confirmed in quantum proceedings. The only evidence and foundation for imposition of penalty on addition on issue Nos. 1 and 2 is the recovery of the balance sheet which we have reproduced in this order. The Assessing Officer in the assessment order dated 28th March, 1985 in the case of this assessee has specifically mentioned in para 3 that during the search operation carried out at the residential premises of Hira Lal at Pokhar Bhinda on 25/26-11-1976 balance sheet as on KartikBadi 14 of St. Year 2028 (18-10-1971) was found and seized and he reproduced the contents of the balance sheet in the assessment order which is also reproduced in this order. At the same time, the Assessing Officer, while making the addition on issue Nos. 1 and 2, has mentioned that the balance sheet in which the amount of investment found was recovered from the house of the assesse....
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....fer another order dated 9th December, 1982 of the Income-tax Appellate Tribunal, A-Bench, Allahabad in ITA No. 451 (All.) of 1981 in the case of AOP, Hiralal, Asharfi Lal and Bhagirathi Ram. Similar facts were earlier considered by the Income-tax Appellate Tribunal, Allahabad, A-Bench in the case of AOP. The search material seized was the same balance sheet mentioned in this case. The Tribunal clearly recorded at page-3 of the order the details of the seized balance sheet at serial Nos. 12 and 13 which is the only evidence and foundation of the case. The Tribunal, after considering the search material, ie., balance sheet, was of the opinion that there is no evidence, oral or documentary, of the association of three persons in question either for making any investment or for carrying on any business or producing any income. The Tribunal had also considered the statement of Asharfi Lal recorded on 26-11-1976 at the time of search and seizure in which he had denied his business relation or connection with the assessee Bhagirathi Ram. The Tribunal in the order dated 9th December, 1982 in the case of the AOP of these three persons held with regard to the evidentiary value of the balance....
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.... or in its recovery. The Department has clearly failed to connect this evidence with the assessee. The facts and circumstances of this case clearly point to the conclusion that the assessee cannot be asked to explain the recovery of the balance sheet during the course of penalty proceedings. The only evidence and foundation for the imposition of penalty against the assessee was the recovery of the balance sheet. However, we find contrary and find that there is no foundation in this case for imposing any penalty against the assessee, though in assessment proceedings, the consideration might be different. 23. We may examine the penalty matter from different angles. The Department found that there was credit balance of Rs. 1,09,549 in which profit earned was added in a sum of Rs. 27,134 and made the addition of Rs. 1,36,683. The credit balance of Rs. 1,09,549 could not be added in the present assessment year. It appears that the Department has failed to make any enquiry with regard to the credit balance. Therefore, the imposition of penalty on the entire amount is clearly illegal and unreasonable. Therefore, the penalty could not have been imposed on addition made on issue Nos. 1 and....
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....nus of proof and the Department has not brought any evidence on record contrary to that. In view of above findings, there is no need to refer other case laws referred to by the ld. counsel for the assessee. 28. The ld. D.R., on the other hand relied on the following case laws : (1) Judgment of Hon'ble Kerala High Court in the matter of Geo Sea Foods's case in which reference was answered in favour of the assessee and against the revenue. (2) Judgment of Hon'ble Supreme Court in the matter of Mussadilal Ram Bharose 's case in which the assessee had discharged his initial onus and appeal of the revenue was dismissed. (3) Judgment of the Hon'ble Supreme Court in the matter of K.R. Sadayappan 's case . The Tribunal was directed to send the statement of facts. (4) Judgment of Hon'ble Allahabad High Court in the matter of Lrs had Ali's case in which the Tribunal had placed the burden of proof of concealment of income on the revenue and held it to be vitiated in law. (5) Ld. D.R. relied on 246 ITR 280 (sic). However, no relevant judgment was found at page-280. (6) Order of the Income-tax Appellate Tribunal, Chandigarh Bench, in the matter of Om Prakash Gupta's case , in which the a....
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....he assessment order does not record the satisfaction as warranted by section 271 for initiating the penalty proceedings." 30. Now, we advert back to the facts of the case to see whether the Assessing Officer had been satisfied before initiating the proceedings under section 271(1)(c) in the matter. The Assessing Officer himself mentioned in the assessment order that main assessment is made in the case of AOP and protective assessment is made in the case of the assessee as individual. Therefore, the Assessing Officer was satisfied that the entire seized material is connected with the AOP. However, his findings were quashed by the Income-tax Appellate Tribunal vide order dated 9th December, 1982. The proceedings under section 148 were stated to be issued videnotice dated 12-3-1981, copy of which is filed in the Paper Book also. Therefore, the Assessing Officer remained under the impression that all search material belonged to the AOP. Therefore, the Assessing Officer could not have been satisfied that he is validly issuing the penalty notice against the assessee in his individual capacity. The judgment of the Hon'ble Delhi High Court is clearly applicable to the case of the assessee....