TaxTMI 
TaxTMI 
1997 (12) TMI 140
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....e Act. The assessee failed in the first appeal. However, on the second appeal, the Tribunal restored the matter back to the file of the CIT(A) who in his turn set aside the order of the AO directing that reasonable opportunity of being heard to the assessee should be provided. 4. On examination of books of accounts of Jalan Trading Company, Bombay, cash credits amounting to Rs. 25.49 lakhs stood in the name of Jalan HUF/Lohia Agricultural Farm. A further scrutiny of two other concerns of the same group where close relations of the partner of the assessee-firm, were partners, revealed cash credits of Rs. 11,40,000 and Rs. 7 lakhs, respectively for the asst. yr. 1976-77. Thus, a total cash credit of Rs. 43.89 lakhs appeared in the books of this assessee in the account of Lohia Agricultural Farm A/c in different concerns of the assessee from 26th Nov., 1974 to 7th Oct., 1975. The assessee was asked to explain the sources of cash credit and explanations with regard to the same, if any. The assessee was further required to produce books of account of Lohia Agricultural Farm (LAF) for the relevant period, details of land and cultivation carried on the same, details of the land of LAF,....
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....g to the years under consideration of the income from the farm. No details of any Khatauni and no details regarding names and addresses of the parties to whom the goods were sold were given by the assessee. The AO however insisted upon the assessee to provide the evidence regarding irrigation of the farm and its full mechanisation and using of fertilisers of improved seeds, etc. It was submitted that after conducting enquiries during the asst. yr. 1974-75 at Baharaich and examining several witnesses, the Department made various additions in the cases of debtors of LAF which were ultimately confirmed by the Tribunal. It was submitted that during VDS-cum-settlement of 1975, the CIT(A) has accepted that an income of Rs. 2,000 per year per acre should be estimated. The officer, however, found out that the land of 2000 acres was ultimately reduced to 500 acres only. It was stated that an average income per year per acre was Rs. 3,000 to Rs. 6,000. It was submitted that the finding of the CIT(A), Central-I, Bombay that there was 1100 acres of land cannot be challenged any more. The AO, however, did not accept this plea on the ground that such statements were not supported by any other ma....
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.... 5,26,75,117 He also found that no IT or WT returns were filed by the HUFs which were supposed to declare in their income or wealth. On the basis of the above material, the ITO came to the conclusion that the cash credits attributable to agricultural income amounted to Rs. 2,98,52,000 while the total agricultural income upto 1972 was estimated at Rs. 1,67,75,000 and after considering the expenses, it was estimated only at Rs. 97,75,000. The position of the income-tax returns of LAF was equally dismal. On the basis of the above material, the AO was of the opinion that the cash credits amounting to Rs. 25,41,000 was not properly explained and added back to the total income of the assessee. Proceedings under s. 271(1)(c) were also initiated against the assessee. 5. The CIT(A) in a very detailed order dismissed the appeal of the assessee. He accepted the findings of the AO. 6. When the matter was brought to the Tribunal, another detailed order was passed confirming that order. While the matter was in appeal before the CIT(A) in quantum, the AO gave an opportunity of being heard to the assessee with regard to the imposition of penalty under s. 271(1)(c) of the Act and it was h....
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....tted that in view of the Bombay High Court decision in the case of CIT vs. P.M. Shah (1993) 203 ITR 792 (Bom), if the show-cause notice does not mention that the reliance was being placed on the Explanation to the section from confirming of the penalty, the notice was invalid and the penalty cannot be imposed. Our attention was also invited to the decision of the Bombay High Court in the case of Bombay Inventors Industrial Corpn. vs. CIT (1991) 96 CTR (Bom) 206 : (1991) 194 ITR 548 (Bom) and in the case of Ahmedabad Electricity Comp. Ltd. vs. CIT (1992) 106 CTR (Bom) (FB) 78 : (1992) 199 ITR 351 (Bom)(FB). It was submitted that in view of the fact that the AO never informed the assessee that the penalty was being imposed under one of the Explanations applicable to s. 271(1)(c) of the Act and that order was illegal and has to be quashed. 9. Coming to the merits of the case, the assessee's counsel submitted that even if it is conceded that the assessee has failed to prove that LAF had sufficient agricultural income, there cannot be any dispute that LAF had some agricultural income. The LAF agreed to have advanced the amounts in question to the assessee and its group of companies, ....
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....e LAF on account of agricultural income. It could not be taxed as it was agricultural income. It was, therefore, submitted that the decision of the Supreme Court in the case of McDowell & Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC), is clearly applicable to the facts of the instant case. This assessee, right from the beginning submitted false documents, showed false expenses, false purchases and false sales. It was submitted that when the assessee was asked during the regular assessment proceedings to prove its case, it has miserably failed to do so. He also invited our attention to the decision of Bombay High Court in the case of CIT vs. Smt. Kaushalya & Ors. (1995) 216 ITR 660 (Bom). It was submitted that the assessee very well knew the malafide charges against him were there and did not defend himself at all properly. It was, therefore, submitted that the decision of the Gujarat High Court in the case of CIT vs. Lakhdhir Lalji (1972) 85 ITR 77 (Guj) is also of some importance. Taking to the facts of the case, it was submitted that right from the beginning, the assessee had manufactured a lot of evidence to prove that it was having agricultural income which ....
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....t suffer from falsity. Therefore, the provisions of main s. 271(1)(c) can only be applied in this case. As discussed by Hon'ble Bombay High Court in the case of (1992) 203 ITR 792 (Bom), but for such legal fiction of Explanation, it could never have said that there would be concealment or furnishing of inaccurate particulars of income at all. This Explanation has shifted the burden of proof to the assessee and therefore when the Explanation was resorted to by the ITO or by the IAC in penalty proceedings, it was necessary that the assessee must have been informed that the penalty proceedings against him were commenced under the Expln. to s. 271(1)(c) of the Act. 12. The reliance of the standing counsel for the Department on (1995) 216 ITR 660 (Bom) is not very helpful to the Department. In that case, the Hon'ble High Court gave a clear finding that the assessee fully knew in detail the exact charge of the Department against her. In this case, the assessee did not know when the notice was served on him that Expln. to s. 271(1)(c) will be applied against him. Under the facts and the circumstances of the case, we are of the opinion that it is not a case of mere vagueness of notice a....
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....ved, it is necessary to consider the law relating to the concurrent jurisdiction of the IAC, which was prevailing during the period 1st Oct., 1975 till 31st March, 1976, by virtue of the provisions of s. 125A, which were in the following terms. "Prior to its omission, s. 125A, as amended by the Finance (No. 2) Act, 1977, w.e.f. 10th July, 1978, stood as under: (1) The CIT may, by general or special order in writing, direct that all or any of the powers or functions conferred on, or assigned to, the ITO or ITOs by or under this Act in respect of any area, or persons or classes of persons, or income or classes of income, or cases or classes of cases, shall be exercised or performed concurrently by the IAC. (2) Where under sub-s. (1), an IAC exercises concurrent jurisdiction with one or more ITOs in respect of any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, the ITO or ITOs shall exercise the powers and perform the functions under this Act in relation thereto as the IAC may direct. (3) Without prejudice to the generality of the provisions contained in sub-s. (3) of s. 119, every ITO shall also observe and follow suc....