Bharat Vikas Udyog vs Income-Tax Officer.
1995 Latest Caselaw 363 Del

ORDER

N. S. CHOPRA, A.M. :

The assessee is in appeal against order dt. 28th June, 1969, of the learned Dy. CIT(A) dismissing assessees appeal against penalty of Rs. 19,000 levied by the Assessing Officer (AO) under s. 271(1)(c) of the IT Act vide his order dt. 7th March, 1984.

2. The relevant facts are that the assessee is a partnership. It filed its return on 28th July, 1979, disclosing loss of Rs. 1,29,471. The Assessment was framed by the AO computing assessees loss at Rs. 43,471. One of the reasons which led to reduction in the loss computed related to addition of Rs. 57,000 made by the AO under s. 68 of the IT Act being unexplained cash credits/squared up accounts in the names of 9 different parties. The AO noted the following short-term deposits for which he called upon the assessee to explain the nature and source thereof :

Rs.

Rs.

1.

Shri Johri Mal

5,000

2.

Shri Ved Prakash

19,000

3.

Shri M. L. Kansal

2,000

4.

Shri S. P. Singhal

10,000

5.

Smt. Gyanvati Sharma

5,000

6.

Smt. Pratima Singhal

3,000

44,000

He also noted squared up cash accounts in the names of Shri Deepak Bansal Rs. 2,000, Shri V. Kumar Rs. 1,000 and Shri Budh Dev Prasad Rs. 10,000. Here again the AO called upon the assessee to explain the nature and source of these squared up accounts, as also to produce those parties who are not assessed to income-tax. He noted that the assessee was unable to produce the parties involved and, therefore, treated these amounts as assessees income. He initiated penalty proceedings under s. 271(1)(c). The assessee submitted written reply dt. 8th February, 1984, which was found unsatisfactory by the AO when he noted that the assessee has not even filed confirmation letters from all the parties and while he had filed confirmation in respect of some parties, the same even did not contain their addresses. He, therefore, invoked the provisions of Expln. 1 to s. 271(1)(c) and imposed the penalty. The assessee went in appeal before the then learned AAC, who decided the appeal ex parte and confirmed the levy of penalty.

2.1 The assessee came in appeal before the Tribunal, which in their order dt. 19th January, 1988, noted that the IT authorities "misdirected themselves inasmuch as they proceeded on the basis that it was a case which attracted Expln. 1(A) to s. 271(1)(c) and that the assessee had failed to offer an explanation. However, the penalty order as well as the assessment order show that it was a case where the assessee had offered an explanation which the ITO held that the assessee was not able to offered an explanation which the ITO held that the assessee was not able to substantiate and, therefore, the matter had to be considered in the light of Expln. 1(B) to s. 271(1)(c) , namely, "whether the explanation given by the assessee was bona fide and all the facts relating to the same material to the computation of its total income had been disclosed by it". The Tribunal recorded that the assessee had given explanation as also had filed evidence with regard to nature and sources of these loans/deposits and the same was required to be examined in the light of provisions of Expln. 1(B) to s. 271(1)(c). The Tribunal accordingly set aside the matter to the learned AAC for consideration afresh after giving an opportunity of being heard to the assessee.

2.2 In turn the learned Dy. CIT(A) issued notice of hearing to the assessee. He found that the assessee has not filed details of repayment of loans-mode of payment with dates. The learned Dy. CIT(A) Accordingly took the view that the assessee has failed to substantiate the explanation within the meaning of Expln. 1(B) to s. 271(1)(c). The learned Dy. CIT(A), thus, confirmed the penalty levied. The assessee is aggrieved.

2.3 According to the learned authorised representative penalty levied is not justified. He submitted that there is no positive income determined and as such there could be no question of levy of penalty for concealment of income. In support of this proposition the learned authorised representative relied on the judgments of Honble Punjab & Haryana High Court in the case of CIT vs. Prithpal Singh & Co. (1990) 183 ITR 69 (P&H), as also of the Honble jurisdictional High Court of Allahabad in the case of Indo-Gulf Fertilizers & Chemicals vs. Union of India (1992) 195 ITR 485 (All). Alternatively, it was submitted that the assessee fully discharged its onus in having furnished proper explanation substantiated with evidence. The learned authorised representative referred to his paper book containing evidence in support of the nature and source of these deposits and pointed out that the evidence adduced has not even been adequately commented upon by the Revenue.

2.4 On the other hand, the learned Departmental Representative submitted that the assessees explanation that being the case of loss returned and loss assessed and, therefore, no penalty is leviable for concealment of income under s. 271(1)(c) is not settled law. He submitted that the judgment in the case of Prithpal Singh & Co. (supra) was given prior to insertion of Expln. 1 to s. 271(1)(c) , while the judgment in the case of Indo-Gulf Fertilizers & Chemicals (supra) is with reference to the scope of the provisions of s. 143(1A) for the purpose of charging of additional tax. The learned Departmental Representative, therefore, supported the order of the learned Dy. CIT(A).

3. We have heard the learned representatives of the parties at length and have also perused the relevant record, including the paper book filed by the assessee before the learned Dy. CIT(A) as additional evidence. This appeal has to be decided in the context of order of the Tribunal dt. 19th January, 1988, restoring the appeal to the learned AAC with the direction to consider the assessees explanation in the light of Expln. 1(B) to s. 271(1)(c). We are of the view that the explanation offered by the assessee supported with evidence cannot be held as unsubstantiated. In reaching this conclusion we have taken note of the explanation furnished as also evidence adduced in support thereof, as contained in assessees paper book and the same is discussed as below :

3.1 In the case of Johri Mal Sharma, there is confirmation which indicates his address also and he has also filed an affidavit having advance the amount of Rs. 5,000 our of savings from his salary as also out of retirement benefits received from Modi Paints, Modinagar.

3.2 In the case of M. L. Kansal, there is confirmation including his address backed up by an affidavit confirming to have deposited Rs. 2,000 with the assessee. He is also assessed to income-tax by ITO, Ghaziabad, himself. He has also confirmed that he was partner of the assessee-firm. There is evidence on record in support of his contention that he is assessed to income-tax, including an order of assessment or asst. yr. 1979-80 at page 38 of the paper book. There is also evidence on record that he is partner of M/s Kansal Brick Kiln for asst. yr. 1980-81 as also for asst. yr. 1979-80. That he is partner of assessee-firm is evident from the body of assessment order of the assessee-firm itself.

3.3 In the case of Sat Pal Singhal, there is confirmation of cash credit containing this address as also indicating the sources of cash credit, i.e., business earnings and the amounts of Rs. 10,000 having been advanced on different dates.

3.4 In the matter of Gyanvati Sharma, we find confirmation filed by her husband, Shri J. P. Sharma accepting that his wife deposited a sum of Rs. 5,000 with the assessee and it represented her savings over the years from the money she received from him from time to time. This is backed up by affidavit of Smt. Gyanvati Sharma, as also of her confirmation letter which contains full postal address also.

3.5 Smt. Pratima Singhal (Rs. 3,000) : Her confirmation is filed. It contains her address as also backed up by affidavit, which also states the sources of the amount being received on maturity of her CDS Account No. 350 with Muzaffarnagar City Post Office and this is backed up by photo copy of her post office account.

3.6 In the case of V. P. Rajwansh (Rs. 19,000), we find that he filed his confirmation which also contains the source of the deposit being part of his payments of contracts as also other savings. He has filed his affidavit also accepting to have deposited the amounts on seven different dates, as also confirmed to have received a sum of Rs. 75,280 from his contract business from City Board, Muzaffarnagar, for which there is a certificate filed on record. The assessee has also placed on record the sources of the amounts deposited on different dates and it is noticed that even in the immediately preceding assessment year there was a deposit of Rs. 20,000 in the books of the assessee in the name of Shri Ved Prakash.

3.7 Deepak Bansal : He has filed his confirmation to have advanced Rs. 2,000 on two different dates. He was working as manager of M/s Rajkamal Transport Pvt. Ltd. and his address is also given in the said confirmation. He has also filed his affidavit on both.

3.8 As regards V. Kumar (Rs. 1,000) he has also filed his confirmation which includes his address also and the amount represented his savings. He has also filed his affidavit indicating that he is an employee of the assessee serving the same since 1976 in the capacity of factory manager.

3.9 Budh Dev Prasad : He has filed his affidavit. He is engaged in the business of purchase and sale of card board making regular purchases from the assessee. He has confirmed to have deposited Rs. 4,000 on 25th January, 1979, but got it back between 5th February, 1979, and 12th February, 1979, when again he advanced a sum of Rs. 6,000 on 1st March, 1979, but got it back on 22nd March 1979, due to non-supply of goods by the assessee. The assessee has also filed statement of account of Budh Dev Prasad in its books of accounts corroborating the version of Budh Dev Prasad.

4. From a plain reading of facts and evidence on record, it is, thus, clear that the assessee has been able to substantiate its explanation. We cannot ignore the request made by the assessee to the AO to summon the creditors under s. 131 , for which the assessee was ready to bear the expenses. Therefore, we are clearly of the view that penalty levied is not justified. We, thus, allow the assessees appeal.

5. Having allowed the assessees appeal we do not consider it necessary to deal with the alternative ground taken by the assessee that there being no positive income, no penalty could be levied.

6. In the result, appeal is allowed as indicated above.