TaxTMI 
TaxTMI 
1985 (7) TMI 131
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....sp; Rs. (a) Cost of unexplained stock of 430 kgs. yarn 33,600 (b) Cost of 50 kgs. being unexplained yarn 5,400 (c) Cost of unexplained stock of 350 kgs. yarn 32,025 ------- &....
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....eby allowed the appeal of the assessee for the reasons mentioned in his order in paragraph 8 and the same is reproduced hereinafter: "I have given my careful consideration to the aforesaid facts and circumstances of the case and I am inclined to agree with the authorised representative that this would not be a fit case for imposition of the penalty under section 271(1)(c) as had already been held by my predecessor and now even under Explanation to section 271(1)(c). No doubt, the said Explanation raises a presumption against the appellant-firm but the said presumption would be rebuttable. A perusal of the sequence of events in this case do indicate that the appellant firm had tried to hoodwink the banking authorities inasmuch as they had passed on art silk yarn as woollen yarn for pledging and would certainly be liable for any of the consequences therefor in their relationship with the bank under the relevant legal provision. But the question to be considered under the Act will be as to how for the said hoodwinking has resulted in concealment thereof. In this regard, I am unable to agree with the ITO that merely because the art silk yarn had been passed of as woollen yarn it has....
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....ssee, has raised the preliminary objection that the appeal is time barred. On merits, the learned counsel for the assessee relying upon the order of the Commissioner (Appeals) contends that on the facts and in the circumstances of the case, no penalty is imposable. Reliance is placed on the decision in the case CIT v. Sardar Bhagat Singh [1983] 142 ITR 836 (Pat.). He further contends that the facts of the case relied upon by the departmental representative are distinguishable with the case of the assessee. He further contends that when the additions made by the ITO which are the basis for imposition of penalty under section 271(1)(c) have been further deleted or reduced by the AAC and the Tribunal, then the addition should not be the basis for imposition of penalty as the additions are there on change of opinion. He further contends that the assessee has explained that yarn pledged to the Bank of Baroda was not woollen yarn, rather it was silk yarn as the assessee has brought on record the entries to this effect in the books of account of the sister concern, which were produced before the ITO and are incorporated in paragraph 4 of the order of the Commissioner (Appeals) and, theref....
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....t, it is pleaded by the departmental representative that whatever has been stated in the application by the ITO, it is his statement in view of the fact that the ITO is a Class I Gazetted Central Government Officer and, therefore, whatever he has stated in this application is there in the performance of his duties and as such is proof for sufficient cause or reason. But this contention is not at all plausible and, therefore, we reject it. The reason is that the ITO in the income-tax proceeding before the Tribunal is a party and, therefore, he has no better status than that of litigants and that too as the assessee is having, since the assessee is opposite party the respondent. Article 14 of the Constitution of India says that the parties are equal in the eyes of law. Therefore, the ITO is to prove sufficient cause and reason and whatever is stated in this application is merely contention of the ITO for which proof is needed to prove. There is no proof furnished by the ITO even at this stage. It is pertinent to note that there is receipt register in each Government office and whatever mail is received in the office, the same is entered into this register. The ITO has not even shown ....
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.... it was taken from J. Trading Co., Amritsar and the copy of the books of account of J. Trading Co. was produced. The entries in this copy are produced in paragraph 3 of the order of the Commissioner (Appeals) and these are as under: "Debit Rs. Credit Rs. 5-6-1974 12-8-1974 To 300 kgs. of art silk By 300 kgs. of art silk yarn-count 150-III- yarn-count 150-III- JK-Transferred to you &n....
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....; from you (Transferred Rs. 23.15 per kg. 5,787.50 to you on 9-12-1974) 2,315.75 9-12-1974 15-2-1975 To 100 kgs. of art silk By 250 kgs. of art silk yarn-count 300-III yarn-count 300-III 'Kesoram' Transferred 'Kesoram' recd. back to you at the rate of from you (Transferred Rs. 23.15 p....
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....above, we hold that the assessee has discharged its initial onus to prove that the amounts of additions are not there due to fraud or wilful or gross neglect on his part. Therefore, it is for the revenue thereafter to prove that the amount of aforesaid additions is there as concealed income of the assessee, which is on account of contumacious conduct on the part of the assessee. There is no material collected by the revenue to discharge this onus, i.e., to prove that the amount of Rs. 27,120 is representing the concealed income of the assessee and that too is concealed with contumacious conduct. 7.2 Besides, the AAC has assigned cogent and relevant reasons for accepting the contentions of the learned counsel for the assessee in paragraph 8 of his order, with which we agree and there is no material brought on record by the revenue to rebut the finding of the Commissioner (Appeals) when he says that as stated earlier, no doubt, the addition has been made in the total income on account of variation in the information given in the bank statement and the stock position with the appellant-firm yet on the basis of the explanation as given it would appear to be doubtful as to whether wh....
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....uthorities have stated that they believed the assessee and, therefore, did not verify the goods, which however justify the stand of the assessee and falsify that of the revenue. Moreover, in penalty proceedings preponderance of probabilities and possibilities to be seen which we have seen and are in favour of the assessee, as we have mentioned above. 7.5 Their Lordships of the Patna High Court in the case of Sardar Bhagat Singh, held that a high standard is always applied for the proof of a positive fact, where the standard of preponderance of probability is sufficient to prove a negative fact, that what the Explanation requires or demands of the assessee is the discharge of the onus of proof of a negative fact, namely, that there has been no active concealment or fraud or wilful neglect on the part of the assessee, that where the onus is on one to prove a negative fact, direct evidence, generally and ordinarily, may be hardly possible, that it is, however, too well settled that circumstances of mere suspicion will not warrant the conclusion of fraud that: "... if the broad probabilities of the explanation offered are such as may be believed, though not sufficient for conclus....