TaxTMI 
TaxTMI 
2003 (2) TMI 151
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....ld/1993 (under s. 271(1)(c) of the IT Act, 1961): 4. This appeal by the assessee is filed on the following effective grounds of appeal: "1. Because the learned CIT(A) has erred in law and on facts in holding that penalty under s. 271(1)(c) was justified and upholding the same. 2. Because the stray piece or paper alleged to be construable as balance sheet of some business, already stood adjudicated from the stage of the Hon'ble Tribunal in the case of AOP in the following words: "11. The papers seized and referred to at serial No. 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 not have been considered to be the income of the appellant for the year under consideration and, therefo....
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....ration carried out at the residential premises of Hiralal at Pokhra Bhinda on 25th/26th Nov., 1976, the balance sheet as on Kartik Badi 14 of St. year 2028 (18th Oct., 1971) was found. The balance sheet is as under: Liabilities Assets 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 Intt. 26,788 Bhagirathi Ram 5,650 Profit 489 Share of profit Asharfi Lal 27,134 Bhagirath Ram 27,134 54,268 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 Rs. 5,651. The total works out at Rs. 1,36,683. This amount included the profit of Rs. 27,134 and, as such, unexplained capital became in a sum of Rs. 1,09,549. Accordingly, it was stated to be from unexplained source and found invested in the business and profit. Total was Rs. 1,36,683. 3. The assessee jointly with Shri Haralal h....
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....im. The learned 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 dt. 25th March, 1993. 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 incorporated above. 9. We have heard the learned counsel for the assessee and the learned Departmental Representative. The learned counsel for the assessee, besides relying on the grounds of appeal, filed paper book containing statement showing details of finally assessed income for the asst. yr. 1972-73, filling of the return, copy of the reply to the penalty proceedings, copy of the assessment order dt. 28th March, 1985, copy of the order of the CIT(A) on quantum dt. 9th Feb., 1987, copy of the order of the Tribunal, Allahabad, 'B' Bench, dt. 26th April, 1990, in ITA No. 449/Al....
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....ed on quantum by the 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 of the Tribunal's order on quantum. He has further argued that internal p. 22 of the Tribunal's order dt. 26th April, 1990, show that the balance sheet and P&L a/c were recovered from residential premises of Asharifi Lal. He has further argued that the findings of the Tribunal are that Shri Asharfi Lal and Shri Hira Lal are doing business of Sarrafa and pawning jointly. Therefore, there is no question of income being assessed in the hands of individual and it could be assessed only in the hands of AOP. He has further argued that the findings of the Tribunal are against the findings of the Tribunal in the case....
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.... 150 CTR (All) 444 : (1998) 232 ITR 673 (All) (iii) Pandit Govind Prasad Mishra vs. CIT (1999) 238 ITR 338 (All), and (iv) Motilal Padampat Sugar Mills Co. Ltd. vs. State of U.P. & Ors. (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 on issue Nos. 1 and 2 have been confirmed by the Tribunal, Allahabad Bench, vide order dt. 26th April, 1990 in ITA No. 449/Alld/1987. On issue No. 3, the CIT(A) has partially reduced the unexplained investment in the purchase of land and construction of house. However, the Tribunal 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 have been imposed upon the assessee in respect of issue No. 4, i.e., unexplained investment in the construction of house in a sum of Rs. 25,500. 14. However, learned counsel for the assessee argued that in the penalty proceedings, the assessment proceeding or order could ha....
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....essee was liable to be ignored and so the penalty was not imposable." Hon'ble Allahabad High Court in the matter of CIT vs. Ishtiaq Hussain held as under: "The degree of proof necessary under the Explanation to s. 271(1)(c) of the IT Act, 1961, is that as in a civil suit, viz., preponderance of probability. The Explanation merely raised a rebuattable 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 these findings cannot operate as res judiciata 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 the balance of probabilities, the amounts in question were not received by the assessee from R. In the opinion of the Tribunal, the assessee had discharged the onus that lay upon him under the Explanation to s. 271(1)(c) as it stood at the relevant time. The findings recorded by the Tribunal....
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.... 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 AO in the assessment order dt. 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 25th/26th Nov., 1976, balance sheet as on Kartik Badi 14 of St. year 2028 (18th Oct., 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 AO, 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 assessee. The AO further mentioned that mere denial of the assessee has not been able to explain the nature and source of investment of Rs. 1,09,549 and, as such, added this amount towards assessee's total income alongwith the profit of Rs. 27,134 and thus total income was added in a sum of Rs. 1,36,683. Similar is the addition made of unexplained investment in pawning orn....
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....idence and foundation of the case. The Tribunal, after considering the search material, i.e., 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 26th Nov., 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 dt. 9th Dec., 1982 in the case of the AOP of these three persons held with regard to the evidentiary value of the balance sheet: "The papers seized as referred to at serial Nos. 12 and 13, even if construable as balance sheet of 1971-72 an 1972-73 and neither have been established to be in the handwriting of any of the three persons in question nor any connection has been established with them. They are, therefore, not relevant." Accordingly, the assessment in the status of alleged AOP was quashed. 21. During the course of argument, learned Departmental Representative could not point out whether the aforesaid order of the Tribun....
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...., 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 2. 24. The addition of Rs. 10,150 on issue No. 3 was confirmed by the Tribunal vide order dt. 26th April, 1990 on quantum appeal against the assessee in ITA No. 449/Alld/1987. The AO has estimated the unexplained investment in purchase of land and construction of house in a sum of Rs. 15,300. Such estimate of unexplained investment was not approved by the CIT(A) vide his order dt. 9th Feb., 1987. The CIT(A) granted partial relief to the assessee in a sum of Rs. 5,150 and accordingly estimated the unexplained investment in a sum of Rs. 10,150. This addition was ....
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....ue was dismissed. (3) Judgment of the Hon'ble Supreme Court in the matter of CIT vs. K.R. Sadayappan. The Tribunal was directed to send the statement of facts. (4) Judgment of Hon'ble Allahabad High Court in the matter of Addl. CIT vs. Irshad Ali (1992) 103 CTR (All) 382 : (1992) 197 ITR 144 (All) 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) Learned Departmental Representative relied on 246 ITR 280 (sic). However, no relevant judgment was found at p. 280. (6) Order of the Tribunal, Chandigarh Bench, in the matter of Om Prakash Gupta vs. ITO in which the assessee had failed to establish the source and genuineness of the amount credited in the name of 51 parties. All these authorities would not support the contention of the learned Departmental Representative and are clearly distinguishable on facts. In view of above findings, the penalty is liable to be cancelled against the assessee. 29. The learned counsel for the assessee lastly argued that no satisfaction has been recorded by the AO in the assessment order while initiating penalty proceedings and he relied upon the judgment of Hon'....
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....were quashed by the Tribunal vide order dt. 9th Dec., 1982. The proceedings under s.148 were stated to be issued vide notice dt. 12th March, 1981, copy of which is filed in the paper book also. Therefore, the AO remained under the impression that all search material belonged to the AOP. Therefore, the AO 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. Therefore, on this reason also, the penalty order is clearly vitiated in law. 31. Keeping in view the above discussion, we allow the appeal of the assessee by setting aside the impugned orders of the authorities below and cancel the penalty under s. 271(1)(c) of the IT Act. ITA No. 1075/Alld/1993 [Under s. 271(1)(a)]: 32. This appeal by the assessee is filed on the following effective grounds of appeal: "1. Because the learned CIT(A) was not justified in passing the order ex-parte and in confirming the levy of penalty under s. 271(1)(a). 2. Because the learned CIT(A) has erred in law and on facts in holding that 'the appellant had taxable income which was....