Income Tax Appellate Tribunal - Chandigarh
Om Prakash Gupta vs Income Tax Officer on 10 August, 2001
Equivalent citations: [2002]81ITD55(CHD)
ORDER
Joginder Pall, AM.
This appeal of the assesses arises from the order of the CIT(A), Ludhiana, for the asst. yr. 1982-83.
2. The only effective issue raised in this appeal is that the CIT(A) was not justified in upholding the penalty of Rs. 2,59,653 imposed by the AO under s. 271(1)(c) of the IT Act. The facts of the case are that the assessee had filed return of income declaring therein income of Rs. 29,600. In the return of income, the assessee had shown income from house property, interest income and share of profits from two firms, namely, M/s Jindal Udyog and M/s Rothman Industries. The assessee was also carrying on a proprietary business of M/s Supreme Mechanical & Electrical Engineering Works, Ludhiana, in respect which loss of Rs. 15.687 was claimed. During the course of assessment proceedings, the AO noticed credits of Rs. 4,08,300 in the names of 51 parties stated to be advances received for supply of goods. The AO noticed the following suspicious features in respect of these advances :
(i) These advances were received by the concern, namely, M/s Supreme Mechanical & Electrical Engineering Works. But this concern did not have any land, building, machinery, electric-connection or any basic infrastructure necessary to produce articles, namely, the hand-tools against which the advances were alleged to have been received.
(ii) Some of the advances were stated to have been received on the form of M/s Chawla Products Corporation, Ludhiana, which is a non-existent firm.
(iii) All the advances were received in cash, which was highly improbable, (iv) Shri Anil Chawla, was alleged to have booked orders for the assessee and had booked an order with a Bangalore firm on 1st Oct., 1981 and received Rs. 8,000 as advance. On the same date he is alleged to have received an advance of Rs. 9,000 from a Pondichery firm, which was physically impossible to do so. (v) Shri Sandeep had allegedly booked an order for the assessee on 1st June, 1981 at Bombay but on the same date he was supposed to have deposited cash collected from Delhi with the assessee at Ludhiana, which again was physically impossible. The AO, therefore, called upon the assessee to furnish detailed evidence in support of the amounts received of Rs. 4,08,300. The assessee filed copies of accounts of 51 parties from his books of account. Thereafter, the AO called upon the assessee to produce all the parties along with their book of accounts and to prove the genuineness of the advances. The assessee could not produce any of the above-mentioned parties. However, he submitted that the assessee had raised these amounts through three agents. On being asked to produce the agents, the assessee could produce only one agent, namely, Shri Anil Chawla, and the remaining two agents were not produced. But the AO declined to record the statement of Shri Anil Chawla because he wanted to examine all the three agents together. Later on, the assessee filed an affidavit of Shri Anil Chawla.
2.1. Since the assessee did not produce the above-mentioned parties, the AO sent registered letters to all the 51 parties to verify the genuineness of the credits. All the registered letters except one were returned by the postal authorities with the remarks "no such person exist" or with the remark "insufficient address". Only one person who received the registered letter categorically denied having advanced any amount to the assessee. Thereafter, the AO also deputed his Inspector to Delhi to verify, whether any of the persons from whom the assessee alleged to have received advances actually resided at the given addresses. After making the inquiries, the Inspector reported to the AO that these persons were not found residing at the given addresses. He also reported that there was no practice in the hand-tool trade to book orders by giving advances and the practice was that goods were received first and payments for the same were being made after one to three months from the date of delivery of goods. The assessee was duly confronted with these facts. Still, however, the assessee could not produce any of the persons. However, the assessee submitted before the AO that he received these advances because he was in dire need of finance. The assessee could also not furnish any evidence as to how the amounts in question were received from the so-called agents at Bombay, Bangalore, Madras, Pondicherry, etc. The AO also took note of the fact that the assessee had not paid any amount by way of commission, travelling expenses, boarding and lodging to the agents.
2.2. The AO also took note of the fact that the amounts covered by advances were in fact given to M/s Jindal Udyog by way of capital in which the assessee was a partner. The AO, after taking note of these facts and also in the light of the judgment of Punjab & Haryana High Court in the case of Hari Chand Virender Paul v. CIT (1982) 140 FTR 148 (P&H). held that the assessee failed to establish the identity of the creditors, their capacity to advance the amounts and genuineness of the transactions. He, therefore, held that amount of Rs. 4,08,300 introduced in the names of 51 parties in fact represented the undisclosed income of the assessee. Accordingly, the AO made an addition of Rs. 4,08,300 and also initiated penalty proceedings under Section 271(1)(c).
3. Being aggrieved with the order of the AO, the assessee took the matter in appeal before the CIT(A). During the course of appeal proceedings, the assessee took an alternative plea that the amounts received were out of intangible additions made in the case of the firm, namely, M/s Jindal Udyog, and that was borne out of the fact that amounts collected were ultimately passed on to M/s Jindal Udyog. The assessee contended that he acted only as a conduit pipe. It was submitted that M/s Jindal Udyog had already filed an application before the Settlement Commission admitting additional income. However, these submissions of the assessee did not find favour with the CIT(A). He took note of the fact that in the books of account of the assessee, the advances were appearing in the names of third parties. Relying on the judgments of Punjab & Haryana High Court in the cases of Gumani Ram Shri Ram v. GIT (1975) 98 ITR 337 (P&H) and Sat Parkash Ram Naranjan v. CIT (1975) 100 ITR 130 (P&H), the CIT(A) held that in a case, where entries stood in the name of an independent third party, burden will still lie upon the assessee to establish the identity of the third party and to satisfy the ITO that the entry was real and not fictitious. The CIT(A) also noted that the alternative plea of the assessee that these amounts in fact belonged to M/s Jindal Udyog was only an afterthought. No such stand was taken before the AO. He, therefore, confirmed the addition made by the AO. Aggrieved further, the assessee took the matter in appeal before the Tribunal.
4. The Tribunal took note of the fact that M/s Jindal Udyog, in which the assessee was a partner, had filed a petition before the Settlement Commission. The Tribunal, therefore, set aside the order of the CIT(A) and restored the matter to the file of the AO with a direction to redecide the issue in accordance with the directions of the Settlement Commission. However, the application filed before the Settlement Commission by M/s Jindal Udyog was rejected by the Commission by recording the following findings :
"8. We have carefully considered the arguments advanced on behalf of the CIT as well as the assessee. The assessee admits that he had taken up a false position before the ITO regarding the source of cash credits appearing in the accounts of 51 parties. Not only this position was reiterated several times but false evidence was also led in support of the claim. The assessee even induced one Shri Anil Chawla to make a false affidavit averring that he had, as an agent of the assessee, obtained advances from various parties against orders for supply of hand-tools, etc. It was only when the assessee realized that he had no case before the IT authorities that he contended that the advances really represented the concealed income of the firm M/s Jindal Udyog. In view of these facts, we are of the considered view that the assessee is only trying to abuse the process of the Commission to get out of the difficult situation. We accordingly hold that having regard to the nature and circumstances of the case, this is not a fit case for admission. The application is accordingly rejected."
5. Thereafter, the AO again decided the set-aside assessment on 28th March, 1989 by making the addition of Rs. 4,08,300, which was again disputed by the assessee before the CIT(A). The CIT(A) confirmed the addition made by the AO vide his order dt. 23rd Feb., 1990. Aggrieved further, the assessee took the matter in appeal before the Tribunal. The Tribunal confirmed the addition by recording the following findings in para 5 of its order dt. 23rd Aug., 1993 :
"5. The contentions of the Departmental Representative have been very carefully considered. The total income as returned by the assessee is Rs. 4,28,880, which includes Rs. 4,08,300. It is an admitted position that the credit initially appeared in the books of the assessee. The manner in which the stand changed by the assessee at various stages, namely, initially the assessee stated that the advances were for supply of tools received by it, modifying it the second time as received through the agents and finally stating that parties were persuaded; not to insist for supplies but to receive the money back and later on stating that the amount was given over to the firm in which the assessee was a partner. All these indicate that the assessee is not sure of himself. If the claim of the assessee that the money did belong to 51 parties and it was so received with the help of agents, at the commencement of the proceedings itself he could have stated so. There would have been so need to change the stand or the stories. Obviously the assessee has no evidence to substantiate that it was advances that were received and that it has also not substantiated the genuineness of the transactions, the identity of the creditors, etc. In our view, the addition, as had been made in the hands of the assessee is fully justified in these circumstances."
6. The assessee filed miscellaneous petition against the aforesaid order of the Tribunal, which was rejected vide its order, dt. 12th July, 1994. The assessee again filed second miscellaneous petition before the Tribunal on which there was a difference of opinion between the learned JM and the learned AM and, therefore, the matter was referred to the learned TM. Agreeing with the learned AM, the learned TM declined to recall the order of the Tribunal and rejected the second miscellaneous petition. The assessee has now filed an appeal before the Hon'ble Punjab & Haryana High Court against the order of the Tribunal, dt. 9th June, 2000, passed in MA No. 58/Del/1996 arising out of ITA No. 583/Chandi/1990 rejecting the second miscellaneous petition and the same is pending for admission.
6.1. As mentioned above, the AO initiated penalty proceedings under s. 271(1)(c) at the time of completing the assessment. Taking into account all the relevant facts of the case as also the fact that addition made by the AO was upheld in appeal and that application filed by M/s Jindal Udyog before the Settlement Commission was also rejected, the AO held that the assessee had concealed the particulars of income and accordingly imposed penalty of Rs. 2,59,653 @ 100 per cent of the tax sought to be evaded.
7. Being aggrieved with the order of the AO, the assessee took the matter in appeal before the CIT(A). It was contended before the CIT(A) that addition made in the hands of the assessee was covered by the intangible additions made in the hands of the M/s Jindal Udyog for the earlier years. However, this submission of the assessee did not find favour with the CIT(A) on the ground that money had not been introduced in the books of M/s Jindal Udyog; rather the same was introduced in the gooks of account of the assessee. If the amounts in question had really belonged to the firm M/s Jindal Udyog, the same should have been credited in their books of accounts. He also took note of the fact that amount of advances did not tally with the amount receivable from the firm. He further noted that the money was stated to have been withdrawn from the books of accounts of the firm and if the money actually belonged to the firm, there was no need for showing the return of the money to the assessee. Besides, the amount due from the firm M/s Jindal Udyog was in the form of capital of the assessee and not a loan given to the firm. It was for this reason that Settlement Commission did not admit the application by observing that the assessee was "only trying to abuse the process of the Commission to get out of the difficult situation." Thus, the CIT(A) held that even on merits, it has been established that the assessee had introduced money, the source in respect of which he could not prove and that the matter would be covered by the 1st Expln. to Section 271(1)(c). In this case, the assessee had offered an explanation in regard to the facts material to the computation of his total income and such explanation was found to be false. Accordingly, the CIT(A) confirmed the penalty imposed by the AO. The assessee is aggrieved by the order of the CIT(A) and hence this appeal before us.
8. The learned counsel for the assessee reiterated the submissions, which were made before the lower authorities. At the outset, he narrated the sequence of events as detailed above. He submitted that the assessee was a working partner in the firm of M/s Jindal Udyog. He drew our attention to pp 5 to 10 of the paper book containing copies of accounts of 51 persons as appearing in its books on account. He submitted that the stand of the assessee before the AO was that he had received the advances against the booking of orders through agents but for the first time a legal plea was taken before the CIT(A) that amounts covered were owned by M/s Jindal Udyog where the assessee was a partner. He submitted that this being purely a legal plea, the same could be taken at any point of time. He drew our attention to p 32 of the paper book where such plea was taken before the CIT(A). Drawing our attention to pp 52 to 56 of the paper book, which is a copy of the Tribunal's order dt. 23rd Aug., 1993, he submitted that it was not correct to record a finding that the assesses had been shifting his stand at various stages. He submitted that amounts in question actually belonged to M/s Jindal Udyog and this stand was taken before the first appellate authority and thereafter the stand has never been changed and, therefore, it could not be said that the assesses had been taking a shifting stand. Drawing our attention to p. 90 of paper book, he submitted that additional income of Rs. 60,000, Rs. 1,40,000, Rs. 1,30,000 and Rs. 1,02,612 was offered/made in the hands of M/s Jindal Udyog for the asst. yrs. 1979-80, 1980-81, 1981-82 and 1982-83 respectively. Therefore, the assessee was within his rights to raise an alternative plea at any stage of the proceedings. For this proposition he relied on the following judgments :
(i) CIT v. Ram Sanehi Gian Chand (1972) 86 ITR 724 (P&H);
(ii) CIT v. Prem Chand Jain (1991) 189 ITR 320 (P&H);
(iii) Addl. CIT v. Ghai Lime Stone Co. (1983) 144 ITR 140 (MP);
(iv) CIT v. Kanshi Nath Dutta (1989) 180 ITR 221 (Cal); and
(v) Anantharam Veerasinghaiah & Co. v. CIT (1980) 123 ITR 457 (SC).
8.1. He further submitted that penalty proceedings and assessment proceedings are independent proceedings. Mere fact that addition made by the AO has been upheld by the Tribunal in appeal would not by itself justify levy of penalty under Section 271(1)(c). For this proposition, he relied on the following judgments :
(i) CIT v. Dharamchand L. Shah (1993) 204 ITR 462 (Bom);
(ii) CIT v. Ramaswamy Naidu (1994) 208 ITR 377 (Mad);
(iii) CIT v. Jai Raj Talkies (1999) 239 ITR 914 (Mad); and
(iv) CIT v. Ponnuswamy Naidu (1995) 214 ITR 185 (Mad).
8.2 He submitted that considering the fact that the Tribunal had wrongly upheld the addition in hands of the assessee, the question of levy of penalty would not arise in the hands of the assessee. He submitted that since the additions in the hands of M/s Jindal Udyog had already been accepted, no penalty could be imposed. For this proposition, he relied on the following judgments :
(i) Addl. CIT v. Burugupalli China Krishnamurthy (deed) and Ors. (1980) 121 ITR 236 (AP);
(ii) Sohinder Singh & Bros. v. CIT (1980) 121 ITR 834 (P&H);
(iii) CIT v. Bombay Automobiles (1980) 123 ITR 582 (AP):
(iv) CIT v. Vinaychand Harilal (1979) 120 ITR 752 (Guj);
(v) Krishan Lal Shiv Chand Rai v. CIT (1973) 88 ITR 293 (P&H);
(vi) Gumani Ram Shri Ram v. CIT (1972) 85 ITR 67 (P&H);
(vii) CIT v. Mansa Ram & Sons (1977) 106 ITR 307 (All);
(viii) Bhagwanji Bhawanbhai & Co. v. CIT (1982) 141 ITR 640 (Cal);
(ix) Addl. CIT v. Solar Chemicals (P) Ltd. (1985) 150 ITR 410 (All);
(x) CIT v. Punjab Tyres (1986) 162 ITR 517 (MP);
(xi) Sir Shadi Lal Sugar & General Mills Ltd. v. CIT (1987) 168 ITR 705 (SC);
(xii) CIT v. C.J. Rathnaswamy (1997) 223 ITR 5 (Mad);
(xiii) Saurav Diesel Sales & Services v. CIT (1997) 223 ITR 347 (Gau); and
(xiv) CIT v. Adam Khan (1997) 223 ITR 264 (Mad).
8.3. He further submitted that for the purpose of initiating proceedings under Section 271(1)(c), the AO was required to record his satisfaction and to form his opinion during the course of assessment proceedings. Mere initiation of penalty proceedings would not be sufficient. He drew our attention to the second assessment order passed by the AO at pp. 44 to 48 of the paper book and submitted that the AO had merely initiated penalty proceedings under Section 271(1)(c) without mentioning specifically as to whether the assessee had concealed the income or furnished inaccurate particulars thereof. There was no satisfaction recorded regarding forming of opinion for which penalty proceeding had been initiated. Thus he submitted that penalty proceedings initiated by the AO were not valid. For this proposition relied on the following judgments :
(i) Dewan Enterprises v. CIT (2000) 246 ITR 571 (Del);
(ii) D.M. Manasvi v. CIT (1972) 86 ITR 557 (SC);
(iii) CIT v. S.V. Angidi Chettiar (1962) 44 ITR 739 (SC);
(iv) Padma Ram Bharali v. CIT (1977) 110 ITR 54 (Gau); and
(v) A.M. Shah & Co. v. CIT (1999) 238 ITR 415 (Guj).
8.4 He also drew our attention to p. 5 of the penalty order passed by the AO where he has mentioned that the assessee concealed particulars of income and filed inaccurate particulars. He submitted that the AO was not sure whether the assessee had concealed the income or furnished inaccurate particulars. The AO is duty-bound to specify the default for which the penalty has been imposed. The same could be not levied for both the defaults. Lastly, he contended that if no benefit had been derived by an assessee by introducing an amount, no penalty could be levied. For this proposition he relied on the judgment of Madras High Court in the case of CIT v. Traders & Traders (2000) 244 ITR 367 (Mad).
9. The learned Departmental Representative, Smt. Rachna Singh, on the other hand, vehemently supported the orders of the lower authorities. She vociferously argued that during the course of completion of assessment the AO had repeatedly mentioned that the assessee had introduced his own money in the guise of alleged advances. She drew our attention to p. 6 of the assessment order, dt. 30th March, 1985, where after making the addition of Rs. 4,08,300 as income from undisclosed sources, the AO had recorded his satisfaction for initiation of proceedings under Section 271(1)(c) in the body of order itself for which a notice was also issued as is evident from the assessment order. Thus, it was not correct to say that the AO had not recorded the satisfaction before initiating penalty proceedings. She further submitted that assessment was set aside by the Tribunal for a limited purpose to await the outcome of M/s Jindal Udyog's application filed before the Settlement Commission. Even at the time of completing the set-aside assessment, the AO had again recorded his satisfaction for initiating penalty proceedings which is evident from p. 48 of the paper book which is a copy of the assessment order, dt. 28th March, 1989. She further submitted that assessee's submission that the AO had not recorded a specific finding as to whether penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income was without any substance. She submitted that satisfaction recorded in the assessment order was also to be seen along with the notice for penalty proceedings issued to the assessee, where relevant part of notice, which was not applicable to the facts of the case, was scored off. In this case, the assessee has not submitted a notice issued under Section 271(1)(c), which could clinch the issue. She further submitted that right from the first stage the conduct of the assessee was contumacious. The assessee had introduced amounts of Rs. 4,08,300 in the names of 51 parties. The assessee neither produced the parties before the AO nor furnished any evidence to prove the source and genuineness of the same. The assessee submitted that these amounts were received against booking of orders through three agents. Only one of the three agents was produced. Two agents were not produced. She also drew our attention to p. 3 para 5 of CIT(A)'s order where all the salient features about the advances, which enabled the AO to come to the conclusion that so-called advanced represented undisclosed income of the assessee, have been mentioned. She further submitted that these facts were duly taken into account by the CIT(A) in confirming the penalty. She also drew our attention to p. 4 of the penalty order where the AO has reproduced the finding recorded by the Settlement Commission in rejecting the application filed by M/s Jindal Udyog where Settlement Commission has recorded that the assessee had induced one Shri Anil Chawla to make a false affidavit averring that he had, as an agent of the assessee, obtained advances from various parties against orders for supply of hand-tools etc. It was only when the assessee realized that he had no case before the IT authorities that he contended that the advances really represented the concealed income of the firm, namely, M/s Jindal Udyog. In the light of these facts the Settlement Commission has recorded "that the assessee is only trying to abuse the process of the Commission to get out of difficult situation." She further drew our attention to Tribunal's second order on pp. 52 to 56 of the paper book, where in para 5 of the order, the Tribunal has recorded that the manner in which the stand changed by the assessee at various stages, namely, initially the assessee stated that the advances were for supply of tools received by it, modifying it second time as received through the agents and finally stating that parties were persuaded not to insist for supplies but to receive the money back and later on stating that the amount was given over to the firm in which the assessee was a partner. The Tribunal has also observed that if the claim of the assessee that the money did belong to 51 parties and it was so received with the help of agents, at the commencement of the proceedings itself, he could have stated so and obviously the assessee has no evidence to substantiate that these were advances that were received and he has also not substantiated the genuineness of the transaction, the identity of the creditors etc. She, therefore, submitted that the assessee failed to establish the source and genuineness of the credits for which the addition had been rightly made and upheld by the Tribunal. These facts also showed contumacious conduct on the part of the assesses. She further submitted that assessee was not entitled to any benefit of so-called intangible additions made in the hands of the firm M/s Jindal Udyog to be given set off against the credits of Rs. 4,08,300. Relying on the judgment of Orissa High Court in the case of A.S. Sandhu & Co. v. CIT (1992) 196 ITR 323 (Ori), the learned Departmental Representative submitted that the onus was on the assessee to establish the existence of funds which could be considered against the unexplained expenditure or unexplained investment of the subsequent assessment year. She submitted that in this case the assessee had failed to establish the existence of fund/income in the hands of the firm, which could be considered against the credits of Rs. 4,08,300. She further drew our attention to p. 4 para 7 of the CIT(A)'s order, where the CIT(A) declined to accept such submission on the ground that the amount of advances in books of account of the firm did not tally with the amount of money receivable by the assessee from the firm. Moreover, income was not disclosed by the assessee himself. Such income was disclosed by the firm in which the assessee was only a partner. The existence of funds in the hands of the firm could not be considered for set off in the hands of the partner.
9.1. As regards the finding recorded by the AO in the penalty order, where he has held that the assessee has concealed the particulars of income and filed inaccurate particulars for which penalty under Section 271(1)(c) has been imposed, the learned Departmental Representative submitted that the facts of the case are such where both the charges against the assessee stand proved. She submitted that both parts of Section 271(1)(c), i.e., 'concealment of income' and furnishing inaccurate particulars of income1 are not mutually exclusive. Relying the judgment of Calcutta High Court in the case of Guru Prosad Shaw v. CIT (1944) 12 ITR 233 (Cal), she submitted that notice under Section 271(1)(c) could be issued at the time of completion of the assessment and since this was issued at the time of completion of the assessment, there was no illegality in initiating the penalty proceedings by the AO.
9.2. She further drew our attention to last para of the CIT(A)'s order, where he has recorded a finding that the matter would be covered by the 1st Explanation to Section 271(1)(c). In this case, the appellant had offered an explanation regarding the facts material to the computation of his total income an such an explanation was found to be false. She, therefore, submitted that the AO had rightly levied the penalty and the CIT(A) had rightly sustained the penalty. Therefore, the order of CIT(A) did not merit any interference. 10. We have heard both the parties at some length and carefully considered the rival submissions. We have examined the facts, evidence and material on record. We have also referred to the relevant pages of the paper book to which our attention was drawn as also the various judgments cited by both the parties. Now, the undisputed facts of the case are that amount of Rs. 4,08,300 was found credited in the books of accounts of the assessee in the names of 51 parties. Since the amount was found credited in the books of accounts of the assessee, the AO rightly called upon the assessee to establish the source and genuineness thereof as per provisions of Section 68 of the IT Act. It is also a fact that none of the 51 parties had been produced. No confirmations or affidavits were also filed. Later the assessee stated that these amounts were received through three agents. When called upon by the AO to produce these agents, only one of the agents was produced whose statement was not recorded by the AO. But the Settlement Commission has recorded a finding in their order dt. 10th Oct., 1988 at pp. 39 to 43 of the paper book that the assessee induced Shri Anil Chawla to make a false affidavit averring that he had as an agent of the assessee, obtained advances from various parties against order for supply of hand tools. It is also a fact that application filed by M/s Jindal Udyog before the Settlement Commission was rejected. It is also a fact that addition made of Rs. 4,08,300 has been upheld in appeals right up to the Tribunal. Now, the only issue before us is, whether in the light of the facts and circumstances of the case, the CIT(A) was justified in confirming the penalty imposed by the AO under Section 271(1)(c)? In this regard, the submission of the learned counsel for the assessee is that the assessee had taken purely a legal stand before the CIT(A) that amounts received in the names of 51 parties actually belonged to a firm, namely, M/s Jindal Udyog, and such legal plea could be taken at any stage of proceedings. In this regard he has relied on the various judgments in 86 ITR 724 (P&H), (1991) 189 ITR 320 (P&H), (1982) 144 ITR 140 (MP), (1989) 180 ITR 221 (Cal) and (1980) 123 ITR 457 (SC) (supra). His submission is that this plea of the assessee has never been retracted at any stage thereafter. We agree with the submission of the assessee that the assessee can raise a legal submission at any point of time but this submission of the assessee has never found favour with any of the authorities, i.e., the CIT(A), the Tribunal and even the Settlement Commission. No doubt the learned counsel has submitted that penalty proceedings and assessment proceedings are separate proceedings and the mere fact that addition has been made and sustained in appeal would not by itself justify levy of penalty. We agree with such proposition. But the question shall remain as to what further evidence or material has been placed by the assessee before any of the authorities to justify that though addition was warranted, yet penalty was not justified. In this case, there is not even an iota of evidence submitted by the assessee during the penalty/appeal proceedings. However, if the assessee desires to take benefit of intangible additions or other additions made in the earlier years to be given set off against the unexplained expenditure or cash credits, the onus is on the assessee to establish with necessary evidence that such income or funds of the earlier years were available to the assessee. Reliance in this regard is placed on the judgment of Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. v.
CIT" (supra), where it has been held as under:
"...... The secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded as the source of unexplained expenditure incurred or of cash credits recorded during the subsequent assessment year. It is a matter for consideration in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case. Evidence may exist to show that reliance cannot be placed completely on the availability of previously earned undisclosed income. A number of circumstances of vital significance may point to the conclusion that the cash deficit or cash credit cannot reasonably be related to the amount covered by the intangible addition but must be regarded as pointing to the receipt of undisclosed income earned during the assessment year under consideration. It is open to the revenue to rely on all the circumstances pointing to that conclusion. They must be such as can lead to the firm conclusion that the assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars. The burden remains on the Revenue of proving the existence of material leading to that conclusion."
10.1. Even the Orissa High Court in the case of A.S. Sandhu & Co. v. CIT (supra), relied on by the learned Departmental Representative, has held that secret profits or undisclosed income of an assessee earned in a particular assessment year or in any earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it cannot be laid down as a general proposition that any part of that fund must necessarily be regarded as the source of unexplained expenditure or investment. The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned undisclosed income during the relevant assessment year. (Emphasis, italicised in print, supplied by us) The High Court has also held that it is for the assessee to establish existence of such a fund. In the present case, the assessee has not been able to lead any evidence to establish that additions made in the case of M/s Jindal Udyog by the AO could be considered against the unexplained cash credits of the assessee. The assessee has not even filed copies of the assessment orders in the case of M/s Jindal Udyog where additions were made for the earlier years to establish the nature of additions. If the additions made in the case of M/s Jindal Udyog were such as would cover the unexplained expenses akeady incurred by that concern in the earlier years, no benefit for the same could be available to the assessee. However, in the absence of copies of assessment orders indicating the nature of additions, we cannot make any worthwhile comments on the same. But on the basis of evidence, we are of the considered view that the assessee has not discharged the onus for establishing the availability of funds which could be considered against the additions made in the case of the assessee under reference. It may be mentioned that the submission made by the assessee before the CIT(A) and also before the Tribunal and even before the Settlement Commission has not been accepted. Even otherwise, we hold that due to the following reasons no benefit for the additions made in the case of the firm could be allowed to the assessee :
(i) The assessee has not disclosed the nature of additions made in the case of firm. In other words, the assessee has not established the availability of fund, which could be considered against the additions made in the case of the assessee.
(ii) The additions were made in the case of the firm and not in the hands of the assessee. If at all such benefit could be claimed, the same would be by the firm and not by the assessee.
(iii) The firm is a separate entity distinct from the partners. The assessee can only claim his share of profit from the firm. The income disclosed by the firm is again subject to payment of tax and thereafter any profit arising therefrom is liable to be distributed amongst the partners. Therefore, the assessee cannot claim that entire addition made in the case of firm would be available to the partner to cover the unexplained credits.
(iv) In fact, the CIT(A) has already noted the variation in the amounts credited in the books of account by way of advances and the amounts receivable by the assessee from the firm.
(v) The amounts given to the firm were credited to the capital account of the assessee. It is not a case that amounts given to the firm were shown as advances by the firm. Therefore, amounts given to the firm would be considered as capital contribution and not as a loan.
(vi) As has been rightly observed by the CIT(A) and the Tribunal in quantum appeal that if the money really belonged to the firm and had been transferred to the firm, then there would have been no need to show that these amounts were returned to the persons from whom these were received as advances. The same would have remained in the books of account of the firm. In any case, such plea was taken for the first time only before the CIT(A) in quantum appeal and such plea was not taken before the AO during the assessment proceedings. The Settlement Commission has observed that it was only when the assessee realized that he could not explain the source of advances before the IT authorities, the assessee took the plea that the amount in fact belonged to M/s Jindal Udyog. In view of the above reasons and the reasons given by the CIT(A), the Tribunal and the Settlement Commission, we hold that the assessee is not entitled to any benefit of set off of the additions made in the case of M/s Jindal Udyog to explain the unexplained credits of Rs. 4,08,300. We, therefore, reject such submission of the assessee.
10.2. The next submission of the learned counsel for the assessee that if the assessee has not derived any benefit by introducing these amounts in his books, no penalty could be levied has already been considered. We are unable to accept the submission for the reason that by introducing these amounts in his books of account in the names of 51 persons as advances, the assessee has utilized the resultant money for investment in the firm of M/s Jindal Udyog by way of capital. It is obvious that by introducing these amounts in his Books of accounts, more funds have become available to the assessee. These funds were invested in the firm by way of capital and were credited to his capital account. Records also show that in his books of account, the assessee had shown that amounts were refunded to the parties from whom these Were received. There is no evidence that these amounts flowed back to the firm. It is, therefore, not correct to say that the assessee has not derived any benefit out of these amounts. The judgment of Madras High Court in the case of CIT v. Traders & Traders (supra), relied upon by the learned counsel for the assessee being distinguishable on facts is not applicable to the facts of the present case. In this view of the matter, this submission of the assessee is rejected.
10.3. In the written submissions, the assessee submitted that once the additions on account of cash credits are accepted on agreed basis, there is no case for levying penalty under Section 271(1)(c). The assessee has relied on catena of judgments, cited supra. This submission has also been carefully considered. But we are unable to accept the same. In this case, additions have been made in the hands of the assessee. The assessee took the matter in appeal right up to the Tribunal. The Tribunal set aside the order of the CIT(A) and restored the matter to the file of the. AO with a direction to decide in accordance with the decision of the Settlement Commission on the petition filed by M/s Jindal Udyog. The AO again made the addition, which was disputed in appeal before the CIT(A) and the Tribunal. The Tribunal again upheld the addition. The assessee filed two miscellaneous petitions against the order of the Tribunal, which were rejected. The assessee has now filed an appeal before the Hon'ble High Court against the rejection of the second miscellaneous application before the Tribunal, which is pending admission. Therefore, it is incorrect to say that the additions in the hands of the assessee were made on agreed basis. In this view of the matter, none of the judgments relied upon by the assessee is applicable to the facts of the present case as the additions have not been made on agreed basis. Accordingly, this submission is also rejected.
10.4. The next submission of the learned counsel is that the AO has not recorded his satisfaction before initiating the penalty proceedings under Section 271(1)(c). This submission has also been carefully considered. We find that at the time of completing the original assessment on 30th March, 1985, the AO had clearly recorded on p. 6 that the amount of Rs. 4,08,300 is added as undisclosed income of the assessee for which penalty proceedings under Section 271(1)(c) have also been initiated separately. When the addition was taken in appeal before the Tribunal, the Tribunal set aside the order of the CIT(A) and restored the matter back to the file of the AO with a direction to decide to issue afresh in accordance with the decision of the Settlement Commission on the application moved by the firm M/s Jindal Udyog. Since the application filed by M/s Jindal Udyog before the Settlement Commission was not admitted, the AO completed the assessment on 28th March, 1989, on a total income of Rs. 4,28,880 as computed in the original order by taking into account all the facts already brought on record by the AO while completing the original assessment. The AO again issued a notice under Section 271(1)(c) by recording this fact in the assessment order. The learned Departmental Representative has rightly pointed out that finding recorded by the AO in the assessment order should also be read along with the notice issued under Section 271(1)(c) where the fact not relevant to the case of the assessee is scored off. The assessee has not placed before us a copy of the notice issued by the AO. Therefore, we hold that the AO has rightly initiated the penalty proceedings after recording his satisfaction in the assessment order. Accordingly, the objection raised in this regard is not sustainable. The submission of the assessee is accordingly rejected.
10.5. The next submission of the learned counsel is that in the penalty order the AO has recorded "that the assessee concealed the particulars of income and filed inaccurate particulars for which he is liable to penalty under Section 271(1)(c)." He submitted that both the offences mentioned in Section 271(1)(c), i.e. 'concealment of income' and 'furnishing of inaccurate particulars of income are separate and distinct offences and, therefore, the AO is required to clearly state; whether the assessee had concealed the income or furnished inaccurate particulars thereof. This submission has also been considered. It is no doubt true that for the purpose of imposing penalty for concealment of income, greater burden lies on the AO to establish the fact of concealment on the part of the assessee. If the assessee is found guilty of furnishing inaccurate particulars, the burden is slightly lesser. If the penalty is levied by invoking Expln. 1 to Section 271(1)(c), which deals with the deemed concealment of income, the onus is on the assessee to establish that concealment was not because of any fraud or wilful neglect on the part of the assessee, which he can discharge by leading a very cogent and reliable evidence. From the facts detailed above and the satisfaction recorded in the assessment order, it appears that the AO has initiated the penalty proceedings under the substantive provisions for concealment of income, though in the penalty order he has held the assessee guilty of both the charges, i.e., concealment of income and furnishing of inaccurate particulars of income. In the case of Diwan Enterprises v. CIT (supra), relied upon by the learned counsel, the facts of the case were that the AO had noticed a loan in cash totalling to Rs. 30,000, whereupon the assessee surrendered the said amount to be treated as income of the previous year. Thereafter, the AO initiated penalty proceedings under Section 271D for accepting a loan of Rs. 30,000 in cash in violation of the provisions of Section 269SS and also under Section 271(1)(c) in respect of income of Rs. 30,000 surrendered by the assessee. In the light of these facts, the Hon'ble Delhi High Court held that once the amount of loan of Rs. 30,000 was accepted as income by the assessee, there was no scope for the AO to initiate penalty proceedings under Section 271D because he had an option not to accept surrender made by the assessee. As regard the penalty under Section 271(1)(c), the High Court cancelled the same on the ground that nowhere the AO had recorded the satisfaction that the assessee has concealed the particulars of his income or furnished inaccurate particulars thereof. But the facts of the present case are clearly distinguishable. In this case, the AO has extensively dealt with the issue of unexplained credits for which, admittedly, the assessee had not adduced an iota of evidence before any of the authorities. Besides, the AO has recorded satisfaction for initiating penalty proceedings under Section 271(1)(c) in respect of income from undisclosed sources. The learned counsel for the assessee has also relied on the judgment of Gauhati High Court in the case of Padma Ram Bharali v. CIT (supra), where the facts of the case were that penalty under Section 271(1)(c) was imposed in respect of three items of income, which were included in the revised returns furnished by the assesses. While the Tribunal found omission of not including two items of income in the original return due to defect in the accounting system, the Tribunal held the levy of penalty in respect of one item on the ground that the assessee had failed to discharge its burden of proving that there was no fraud or wilful neglect. On appeal, the High Court cancelled the penalty on the ground that Expln. 1 to Section 271(1)(c) was not applicable in view of the fact that the. Tribunal has not found concealment of income in respect of two of the three items, and if two items are excluded, the difference between the returned and assessed income being less than 20 per cent. Explanation was not applicable. Therefore, the facts of the case before the Gauhati High Court were different from the facts of the present case. Even the Gauhati High Court has held that the facts of some cases may attract both the offences, i.e., concealment of income and furnishing inaccurate particulars thereof, and in some cases there may be overlapping of the two offences, but in such cases the initiation of penalty proceedings must also be for both the offences. In this case, the assessee has not produced before us the show-cause notice issued by the AO under Section 271(1)(c). Therefore, we are unable to appreciate whether the AO had initiated penalty proceedings for concealment of income or for furnishing inaccurate particulars of income or for both, though it appears from the assessment order that penalty proceedings have been initiated for concealment of income. In the penalty order the AO has mentioned both the offences. The facts of the case as indicated above and the findings given by the various authorities, i.e. the CIT(A), the Settlement Commission and the Tribunal as discussed in the preceding paragraph coupled with the fact that the assessee has not adduced any evidence before any of the authorities to prove the genuineness of the credits of Rs. 4,08,300 establish the charge of concealment of income against the assessee. This is further so that enquiries made by the AO during the course of assessment proceedings, where letters addressed to all creditors were returned by the postal authorities unserved and inspector deputed by the AO also reported that none of the parties were existing at the given addresses. Though the results of such enquiries were duly confronted to the assessee, but he made no efforts either during the course of assessment proceedings or during the penalty proceedings to prove his bona fide. It is no doubt true that both assessment proceedings and penalty proceedings are separate proceedings but the material gathered during the course of assessment proceedings is quite relevant for deciding the issue of penalty under Section 271(1)(c). Even during the course of penalty proceedings, the assessee has not made any effort to lead any evidence than what was adduced before the various authorities during the quantum appeals. In the light of evidence already collected by the AO, which also remained uncontroverted by the assessee till date, what further material was required to be produced by the AO to prove the charge of concealment against the assessee. The assessee has only raised a technical objection that the AO has not recorded a finding whether penalty was initiated for concealment of income or for furnishing inaccurate particulars of income. But the assessee has not been able to make any submission as to how the case of the assesses was prejudiced on account of failure on the part of the AO to clearly mention these facts. Taking into account the totality of the facts and circumstances of the case, we are of the view that penalty under Section 271(1)(c) is leviable even for concealment of income where the onus on the Revenue is greater in establishing the concealment of income. The sequence of events as detailed above and the stand taken by the assesses before various authorities also establish the contumacious conduct on the part of the assessee.
10.6. It may further be mentioned that provisions of Section 271(1)(c) have been amended w.e.f. 1st April, 1964, where the word "deliberately" was omitted from the section and Expln. 1 to Section 271(1)(c) was inserted. After these amendments, the judgment of Hon'ble Supreme Court in the case of CIT v. Anwar Ali (1970) 76 ITR 696 (SC), no longer holds good. This position has been accepted by the Punjab & Haryana High Court in the case of Vishwakaima Industries v. CIT (1982) 135ITR 652 (P&H), and the Supreme Court in the cases of CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14 (SC), CIT v. K.R. Sdayappan (1990) 185 ITR 49 (SC) and CIT v. Jeevan Lal Shah (1994) 205 ITR 244 (SC), though the penalty proceedings continue to be penal proceedings. The Hon'ble Supreme Court has also held that it is now to longer necessary that the Department must go further and establish that there was conscious concealment of particulars of income or a deliberate failure to furnish accurate particulars. Considering the fact that the assessee has not been able to lead any evidence about the source and genuineness of credits of Rs. 4,08,300 and in the light of the finding recorded by the CIT(A), the Settlement Commission and the Tribunal, we are of the considered view that penalty under Section 271(1)(c) for concealment of income has been rightly imposed and sustained by the CIT(A).
10.7 Even if the penalty is considered for furnishing inaccurate particulars, the same would also hold good for the reason that in the books of accounts the assessee had shown receipts of Rs. 4,08,300 in the names of 51 parties as advances. The assessee has miserably failed to prove that those advances were genuine. Therefore, it could be held that the assessee has also furnished inaccurate particulars in respect of income of Rs. 4,08,300. Nowhere the assessee has made the submission that he has not furnished inaccurate particulars thereof. Therefore, even on this count, penalty under Section 271(1)(c) could be leviable.
11. Before parting with the case we would like to mention that the C1T(A) has sustained the penalty by invoking Expln. 1 to Section 271(1)(c). It is quite clear that while imposing penalty under Section 271(1)(c), the AO has not invoked Expln. 1 to Section 271(1)(c). But their Lordships of Hon'ble Punjab & Haryana High Court in the case of CIT v. Rajeshwai Singh (1986) 162 ITR 173 (P&H), have held that Expln. 1 to Section 271(1)(c) can be invoked for the first time by the Tribunal. By following the aforesaid judgment of Punjab & Haryana High Court in the case of Rajeshwai Singh (supra) the Tribunal, Chandigarh Bench in the case of Roshan Lal Madan v. Asstt. CIT (1998) 62 TTJ (Chd)(TM) 1 : (2000) 245 ITR (AT) 36, has taken the same view that Expln. 1 to Section 271(1)(c) can be invoked for the first time by the Tribunal. But considering the fact that we have already held that the assessee has concealed the income, we do not consider it necessary to comment on the aspect of 'deemed concealment of income mentioned in Expln. 1 to Section 271(1)(c). Having regard to these facts and circumstances of the case, we in the ultimate analysis, hold that the CIT(A) was justified in confirming the penalty of Rs. 2,59,653 under Section 271(1)(c). The order of the CIT(A) is accordingly upheld. All the grounds of appeal stand dismissed.
12. In the result, the appeal of the assessee is dismissed.