Income Tax Appellate Tribunal - Mumbai
Assistant Commissioner Of Income Tax vs Tribhovandas Bhimji Zaveri & Sons on 8 January, 1996
Equivalent citations: [1996]58ITD197(MUM)
ORDER
K.C. Singhal, J. M.
1. These two appeals by the Revenue are against the orders of the CIT(A) cancelling the penalty under s. 271(1)(c) and under s. 273 pertaining to asst. yr. 1982-83.
2. The brief facts of the case are these.
Assessee is one of the leading jewellers of Bombay. It filed its return of income on 15th June, 1982, declaring its income at Rs. 5,63,910. On 21st Sept., 1982, a search was conducted at the premises of the assessee. A petition under s. 273A was filed by the assessee before the CIT on 27th Jan., 1983, offering Rs. 20 lakhs for taxation purposes with a view to avoid further inquiries and investigations and to buy peace. This petition related to asst. yrs. 1979-80 to 1982-83. This offer was increased gradually to Rs. 30 lakhs and later on further increased to Rs. 52 lakhs plus vide letter dt. 22nd Sept., 1984. This offer was not accepted by the Department. In the meanwhile assessee filed a settlement petition before the Settlement Commission on 31st Oct., 1983, pertaining to asst. yrs. 1979-80 to 1983-84. The said petition was accepted for all the years except for asst. yr. 1982-83. The petition for 1982-83 was rejected on the ground that concealment was likely to be established by the Department.
3. In the course of assessment proceedings the AO asked assessee to file the details of cash creditors. Summons under s. 131 were issued by him to 22 parties at the addresses furnished by the assessee but the same remained unserved with the remarks that such parties were not available at such addresses. The AO vide his letter dt. 17th Dec., 1985, informed the assessee about this fact and further asked the assessee to produce the parties along with the books of accounts and pass books. Since the assessee was not able to produce these cash creditors except in the case of K. B. Shah, HUF, it filed a revised return on 31st March, 1986, under the amnesty scheme offering an additional income of Rs. 7 lakhs which comprised of the following :
(i) Rs. 65,000 As peak amount in respect of 11 cash
creditors, list of which is given in
the letter filed alongwith the revised
return, and appears at page 32 of the
paper book.
(ii) Rs. 5,60,000 On account of remaining cash credits
including also the cash credit in the
name of Rameshchand Jain, list of
which is also given in the letter
filed with the revised return and
appearing at page 33 of the paper
book.
(iii) Rs. 59,938 Interest on the loans of Rs. 5,60,000
----------
Rs. 6,84,938 rounded off +
------------ to
Rs. 7,00,000
-------------
4. Still being not satisfied the AO continued the investigations in regard to loans. He informed assessee vide letter dt. 15th Jan., 1987, that GIR Nos./PA Nos. given in the loan confirmation letters in respect of 218 persons were not correct as they were not found in the respective wards. This fact is also stated to have been informed to the representative of the assessee. The list of these 218 parties was enclosed with that letter (list of persons wrongly mentioned in the penalty order as 253). In response to this letter, assessee vide its letter dt. 3rd Feb., 1987, submitted before the AO that during the year it had only borrowed money from only 24 persons and to the remaining parties only interest had been paid on the loans taken from them in earlier years. It was further submitted that out of these 24 parties, 10 parties were covered under the return filed on 31st March, 1986, under the amnesty scheme. Out of 14 parties 5 had already been before the AO and given their statements to him. Regarding remaining 9 parties, it was submitted that these are covered by the petition under s. 273A.
5. It may also be noted that on 16th Jan., 1987, the AO also issued a letter to the assessee informing that summons had been issued to Miss Rekha Ganeshan, a film actress, for examination to be held on 22nd Jan., 1987. He asked the assessee to remain present during her examination/cross examination. This summons had been issued because she had stated in her statement dt. 9th Nov., 1982, recorded under s. 131 by the ADI, Unit III (5), that she had purchased certain jewellery from the assessee-firm on 15th May, 1981, against the cash payment. The statement of Miss Rekha Ganeshan was, however, recorded by the AO on 25th March, 1987, wherein it was stated that she had visited the shop of the assessee but the jewellery was purchased through some other person who was introduced to her by the partner of the assessee-firm Shri Vajubhai. It appears that the assessee was not asked to cross-examine her in spite of the fact that assessee's Chartered Accountant along with Shri D. M. Harish, Advocate, remained present till 9.00 p.m. This is seen from the letter filed by the assessee in the office of the AO on the next day, i.e., 26th March, 1987, which is placed at page 60 of the compilation.
6. Faced with this situation, assessee again filed a revised return on 30th March, 1987, under the amnesty scheme offering an additional income of Rs. 11.5 lakhs comprising of the following :
(i) Rs. 2,85,000 In respect of loans from
six cash creditors
(ii) Rs. 38,047 interest on above loans
(iii) Rs. 5,50,000 regarding jewellery purchased
by Miss Rekha Ganeshan
(iv) Rs. 2,78,788 Interest on loans taken
------------ in earlier years
Rs. 11,51,835 rounded off to
------------
Rs. 11,50,000
------------
Finally, the assessment, was finalised on the total income of Rs. 26,10,123 after further disallowing interest of Rs. 1,77,212 regarding bogus loans of earlier years and Rs. 25,000 out of the expenses. Penalty proceedings under s. 271(1)(c) and under s. 273 were initiated by the AO in respect of the above additions.
7. In response to the penalty notices under s. 271(1)(c) and under s. 273 the assessee vide its letter dt. 7th July, 1987, requested the AO to drop the penalty proceedings in view of the amnesty scheme. It appears that assessee filed copies of affidavits of 22 parties in the course of penalty proceedings from whom loans had been taken during the year under consideration. Copies of the affidavits appear in the paper book at pages 94 to 115. The AO vide his letter dt. 18th Jan., 1989, informed the assessee that summons issued to these 22 parties in the course of assessment proceedings remained unserved at the addresses furnished by the assessee since none of them was available at such addresses. He, therefore, asked the assessee to produce all these parties along with the books of accounts, pass books, etc., so as to prove the identity, capacity and genuineness of these cash creditors. It was further stated by him that in case assessee finds any difficulty in producing them, it may collect "Dasti summon" from the ITO. In response to this letter, assessee vide its letter dt. 25th Jan., 1989, stated that confirmation letters and affidavits of these parties along with their GIR Nos./PA Nos. have already been given by it. It was further stated that the relevant information may be collected from their respective income-tax records. It was also stated that its case was covered by the various circulars of CBDT and, therefore, no penalty could be levied. It referred to answers to question Nos. 1, 4, 19 and 20 mentioned in the CBDT Circular No. 451, dt. 17th Feb., 1988 in support of its stand. The AO again issued a letter dt. 25th Jan., 1989, to produce these parties but none of them could be produced by the assessee. Finally, the AO rejected the contention of the assessee relating to amnesty scheme and also on merits and imposed the impugned penalties under s. 271(1)(c) and under s. 273. These penalties have been deleted by the CIT(A) by holding that amnesty scheme applies in the present case. Besides this, it was also held by him that penalty was not leviable on merits.
8. The learned Senior Departmental Representative, Mr. Tilakchand, has assailed the order of the CIT(A) on various grounds. His first contention is that the benefits of amnesty scheme could not be provided to the assessee inasmuch as, there was no full and true disclosure of the income. He drew our attention to the order under s. 119(2), dt. 14th Feb., 1986, passed by the CBDT which specifies the conditions for availing the immunity from levy of the penalty under s. 271(1)(c) and under s. 273. The said order is published at (1986) 158 ITR (St) 162. He also drew our attention to question No. 1 provided in Circular No. 451, dt. 17th Feb., 1986. According to him until and unless assessee comes forward with the clean hands and makes a true and full disclosure of its income the immunity from the levy of penalty cannot be granted. In this regard he submitted that the assessee filed its original return declaring its income at Rs. 5,63,910 on 21st Sept., 1982, but when inquiries were started by the AO he came forward with a revised return under the amnesty scheme offering an additional income of Rs. 7 lakhs. Since the AO was not satisfied he started further inquiries and when assessee was unable to prove the cash credits he again filed another revised return under the extended period of the amnesty offering another income of Rs. 11.5 lakhs. He also drew our attention to the fact that assessee filed a petition under s. 273A before the CIT as well as the settlement petition before the Settlement Commission. His emphasis was that the assessee tried every forum for settling the dispute. Since the settlement petition was not admitted by the Settlement Commission the assessee filed the return under the amnesty scheme. He further submitted that the conduct of the assessee was not bona fide and he had not come forward with the true and full disclosure at the time of filing the first amnesty return and it is only because of further investigations that the assessee surrendered additional income. In view of this situation it was argued by him that the CIT(A) was not justified in holding that benefits of the amnesty scheme could be given to the assessee. In support of his contention he relied heavily on the decision of the Tribunal in the case of B. Tex Corpn. vs. ITO (1993) 46 TTJ (Bom) (TM) 668 : (1993) 46 ITD 61 (Bom) (TM) wherein the Third Member has taken a view that the amnesty scheme cannot be applied to a case where the facts were similar to the present case. In addition to this, he relied on the decision of the Bombay Bench of the Tribunal in the case of Asstt. CIT vs. Dalamal & Sons Investment Co. (1994) 49 ITD 87 (Bom) and of Ahmedabad Bench in the case of Asstt. CIT vs. Ilaxi Textiles Industries (1994) 49 TTJ (Ahd) 491 : (1994) 49 ITD 330 (Ahd).
8.1 On merits, it was contended by him that the CIT(A) was not justified in holding that there was no concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee and no penalty could be imposed as the case of the assessee fell within the ratio of the Supreme Court decision in the case of Sir Shadilal Sugar & General Mills Ltd. vs. CIT (1987) 168 ITR 705 (SC). His submission was that in regard to the genuineness of the cash credit the burden lies on the assessee to prove the same and in his support he relied on the two judgments of the Supreme Court reported as Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) and CIT vs. Orissa Corpn. Pvt. Ltd. (1986) 159 ITR 78 (SC). He also drew our attention to the fact that the AO had made an inquiry in respect to the cash credits introduced in the year under appeal and found that the GIR numbers given by the assessee were wrong and the parties were not available at their addresses. This information was confronted with the assessee. Since the assessee was unable to explain the genuineness of the cash credits it offered the same under the amnesty scheme. According to him, the particulars supplied by the assessee in respect to such cash credits were false and, therefore, the AO had found the cash credits as non-genuine and in order to save the penal consequences the assessee had filed the revised return. Regarding the addition made on account of sale of jewellery worth Rs. 5.5 lakhs to Miss Rekha Ganeshan, he relied upon the statement given by her in the course of search conducted at her residence wherein she had admitted that the said jewellery was purchased from the assessee.
8.2 Regarding penalty under s. 273, he submitted that the CIT(A) has not decided the issue on merits and has merely deleted the penalty on the basis of filing of return under the amnesty scheme. According to him, there is huge difference between the returned income and the assessed income and, therefore, the penalty was leviable under s. 273.
9. On the other hand, the learned counsel for the assessee Mr. Anil Harish, has vehemently opposed the contentions of the Revenue. He also drew our attention to Circular No. 451, dt. 17th Feb., 1986, and submitted that the amnesty scheme was applicable to an assessee if the return has been filed before detection by the Department. He referred to question No. 19, the answer to which clarifies that if the ITO only has prima facie belief then it would not mean that concealment has been detected. His submission was that the AO was only in the process on inquiries which could create only suspicion and there was no detection by the AO. According to him, there was no material on record on the basis of which it would be said that concealment had been detected by the AO. His further submission was that the assessee was very much co-operative and had surrendered the amount relating to cash credits and interest thereon as well as the amount pertaining to alleged purchase of jewellery by Miss Rekha Ganeshan in order to buy peace with the Department. He further submitted that the ratio of the judgment of the apex Court in the case of Sir Shadilal Sugar & General Mills (supra) applies to the facts of the present case. In support of his contention he also relied on the various judgments of High Courts and Tribunal which are as under :
(i) Varkey Chacko vs. CIT (1993) 203 ITR 885 (SC);
(ii) Vir Khanna vs. IAC (1995) 51 TTJ (Asr) 670 : (1995) 52 ITD 652 (Asr);
(iii) Ambassador Dry Cleaners vs. Union of India (1995) 80 Taxman 125 (Raj);
(iv) Bombay Cloth Syndicate vs. CIT (1995) 214 ITR 210 (Bom) : (1995) 79 Taxman 352 (Bom);
(v) Asstt. CIT vs. Manorajyam (1995) 54 ITD 116 (Coch);
(vi) Asstt. CIT vs. Prakash Oil Industries (1995) 52 TTJ (Ahd) 514;
(vii) ITO vs. P. M. Suthar (1995) 52 TTJ (Ahd) (TM) 260 : (1995) 214 ITR 12 (Ahd) (TM);
(viii) Jaikishan Gopikishan & Sons & Ors. vs. CIT;
(ix) Laxman vs. CIT;
(x) Anand Kumar Saraf vs. CIT (1994) 75 Taxman 320 (Cal);
(xi) Late Shri J. B. Naik vs. Dy. CIT (1993) 45 TTJ (Ahd) 206;
(xii) ITO vs. Ram Nihora Thakur (1993) 46 ITD 90 (Pat);
(xiii) WTO vs. Anandkumar Pd. Shah (1992) 41 ITD 406 (Pat);
(xiv) Shama Raising Chandel & Anr. vs. ITO (1992) 43 TTJ (Ahd) 268 : (1992) 41 ITD 212 (Ahd);
(xv) Uttamchand Bhutani & Co. vs. ITO (1992) 42 ITD 404 (Del).
10. The rival contentions of the parties as well as the case law and the material to which our attention was drawn have been considered by us carefully. In our opinion, the first contention of the Revenue regarding non-applicability of the amnesty scheme to the present case is not without force. We have gone through the Circular No. 451, dt. 17th Feb., 1986, on which heavy reliance has been placed by the assessee. The said circular is published in (1986) 158 ITR (St) 135. We have also gone through the order of the CBDT dt. 14th Feb., 1986, passed under s. 119(2)(a) which provides immunity from the levy of penalty under s. 271(1)(c) and under s. 273 to those assessees who had made full and true disclosure of the income between the period commencing from 15th day of Feb., 1985 to 31st day of March, 1986. This period was later extended upto 31st March, 1987. For the benefit of our order, we are reproducing the order of CBDT under s. 119(2) which is as under :
"Order dt. 14th Feb., 1986 [F. No. 281/8/86-IT. Inv. III] IT Act, 1961 : Order under s. 119(2)(a); Direction to ITO and IAC not to initiate penalty proceedings under s. 271(1)(a) or 271(1)(c) or 273 in respect of any assessment year upto and including asst. yr. 1985-86.
In exercise of the powers conferred by cl. (a) of sub-s. (2) of s. 119 of the IT Act, 1961 (43 of 1961) the CBDT hereby directs that the ITO and the IAC shall not initiate any proceeding for imposition of a penalty on a person or impose penalty on him for an offence under cl. (a) or cl. (c) of sub-s. (1) of s. 271 or s. 273 in respect of any assessment year upto and include asst. yr. 1985-86 in a case, if he is satisfied that such person :
(a) has prior to the detection by the ITO, or, as the case may be, the IAC, of the concealment of particulars of income or of the inaccurance of particulars furnished in respect of such income, voluntarily and in good faith, made between the 15th Nov., 1985, and the 31st March, 1986, a full and true disclosure of such income;
(b) has, on or before the 31st March, 1986, paid the tax on the income disclosed; and
(c) has co-operated in any enquiry relating to the assessment of income.
2. This order shall come into force on the 17th Feb., 1986.
(Sd.) S. K. Roy, Member (Investigation) Central Board of Direct Taxes.
[F. No. 281/8/86/IT. (Inv. III)].
The bare reading of the aforesaid order clearly shows that in order to claim immunity from imposition of penalty, assessee must satisfy the following condition :
(i) that the assessee must make full and true disclosure of its income;
(ii) the disclosure must be voluntarily and in good faith; and
(iii) that such disclosure must be prior to detection by the AO.
It will also be pertinent to refer to the answers to question Nos. 1 and 21 mentioned in the Circular No. 451 which are relevant in this regard and are being reproduced as under :
"Q. No. 1 - What will be the procedure required to be followed by the assessee who wants to declare income or wealth in respect of the past years ?
(a) in case where the assessments pertaining to those years are already completed;
(b) in case where the assessments in respect of those years are pending.
Answer. - In case where the assessments are already completed, the taxpayer could approach the concerned CIT with the full disclosure of the amounts of income and/or wealth concealed in various years and should also file returns for the relevant years. He should also produce evidence of payment of taxes before 31st March, 1986. The filing of the returns will be regularised by issue of formal notices under s. 148 of the IT Act/s. 17 of the WT Act. In cases where the assessments are pending, the taxpayer should file revised return before the ITO along with evidence of payment of taxes.
Q. No. 21. - Whether such a declaration by the partners could be taken as information by the ITO for initiating proceedings under s. 147(a)(b) against the firm?
Answer. - Yes, unless they also choose to disclose the income of the firm. As pointed out earlier, their desire to turn honest must be full and not partial."
From the combined reading of the said circular and the order under s. 119, it is clear that the most important requirement is that assessee must come forward with clean hands by making a full and true disclosure of its income honestly. Answer to question No. 21 clearly shows that partial disclosure is not covered by the scheme. Therefore, in our opinion, there cannot be any disclosure in piecemeal.
10.1 Now, let us examine whether assessee is entitled to the immunity from levy of penalty under s. 271(1)(c) and under s. 273. In the present case, assessee had filed its return originally on 15th June, 1982, declaring an income of Rs. 5,63,910. The revised return under the amnesty scheme was filed on 31st March, 1986, declaring an additional income of Rs. 7 lakhs on account of cash credits and interest thereon. Again a revised return was filed under the amnesty scheme on 30th June, 1987, offering an additional income of Rs. 11.5 lakhs on account of cash credits and interest thereon as well as on account of alleged sale of jewellery by the assessee to Miss Rekha Ganeshan. Considering the disclosures by the assessee in piecemeal it cannot be said that the assessee had come forward with clean hands. The assessee must have disclosed the entire income while filing the first return under the amnesty scheme. In the present case, the AO was not satisfied with regard to the disclosure made by the assessee in the year 1986 and continued his investigations in respect of the cash credits which were not surrendered by the assessee. Since the assessee was unable to prove the genuineness of the cash credits, it filed another revised return on 30th March, 1987. Had the AO not made further investigations, assessee would have escaped from being taxed in respect of its income which had been surrendered in the second revised return filed on 30th March, 1987. In these circumstances, it could not be said that assessee made full and true disclosure honestly. The view which we have taken is further supported by the decision of the Tribunal, Bombay Bench in the case of B. Tex. Corpn. vs. ITO (supra) wherein the Third Member has taken a similar decision on similar set of facts.
11. The case law relied upon by the learned counsel for the assessee in this regard do not help him. None of the cases relied upon by him deals with a case where disclosures were made in piecemeal. In all the cases the facts were entirely different inasmuch as the disclosure was made truly and fully. Hence, the contention of the assessee cannot be accepted as it has not fulfilled the most important condition of making full and true disclosure as specified in the order of the CBDT under s. 119(2). In the Madhya Pradesh High Court decision reported in (1970) 76 ITR (MP) 103 (sic). Their Lordships had held that the circulars issued by the CBDT under s. 119 are binding on all subordinate authorities. It further held that the CIT is bound to offer an opportunity of hearing and pass a reasoned order. There cannot be any dispute with such proposition. It was a case where a full disclosure was made. The Hon'ble Bombay High Court in the case was concerned with the request whether the return was voluntarily or not. On the contrary, this judgment goes against the assessee as it has been held in that case that one of the conditions for exercising the discretion under s. 273A was making of full and true disclosure of income in good faith. We have already held that assessee had not disclosed the income truly and fully. The Hon'ble Calcutta High Court in the case reported as (1994) 75 Taxman 320 (Cal) (supra) was concerned with a case where the revised return was filed under the amnesty scheme after the search. At page 323 it has been mentioned that it was an admitted fact that assessee had disclosed fully and truly his income which is not the case before us. The Hon'ble Rajasthan High Court in the case reported as (1995) 80 Taxman 125 (Raj) (supra) was concerned with a case where the assessee has made full disclosure under the amnesty scheme. In the Bombay High Court decision in Bombay Cloth Syndicate their Lordships had held that circulars issued by the Board are binding and penalty could not be imposed where revised return was filed disclosing the true and full income. We need not repeat the other citations referred to by the learned counsel for the assessee as in none of the cases the facts are similar to the facts of the present case. Therefore, this contention of the assessee is rejected and it is held that the CIT(A) was not justified in applying the benefits provided by the CBDT in its order under s. 119(2), dt. 14th Feb., 1986, inasmuch as the assessee had failed to disclose its income truly and fully.
12. The next question is whether the order of the CIT(A) can be upheld on merits. It is pertinent to note that following categories of income have been surrendered by the assessee in his revised returns :
(a) Rs. 5,50,000 - On account of alleged sale
of jewellery by the assessee
to Miss Rekha Ganeshan,
(b) Rs. 2,78,788 - On account of disallowances
of interest in respect of
loans pertaining to earlier
years which was substituted
by AO to Rs. 4.5 lakhs and
(c) Rs. 10,07,985 - On account of cash credits
introduced in the books of
account during the year under
consideration and the interest
thereon
(9.10 lakhs + 97,985)
-------------
Rs. 17,36,773 rounded off to
-------------
Rs. 18,50,000
-------------
13. First we take up the surrender of Rs. 5.5 lakhs mentioned in category (a). The language of s. 271(1) (c) speaks of the concealment of particulars of income or furnishing of inaccurate particulars of such income. The word 'conceal' has not been defined in the IT Act. According to the Webster's Dictionary, it means "to hide; secret; keep from sight, discover or knowledge". "According to the Black's Law Dictionary the word 'conceal' means "to hide, secret, or withhold from knowledge of others. To withdraw from observations; to withhold from utterance or declaration; to cover or keep from sight. To hide or withdraw from observation, cover or keep from sight or prevent discovery of." The above definitions clearly show that the question of concealment arises only when the person knowingly hides the information. Therefore, in our opinion, the question of concealment arises only where the assessee is shown to have the knowledge of the income in respect of which the particulars are to be furnished. But where the assessee denies totally in regard to a transaction outside its books, it cannot be charged for concealment of the particulars unless it is established on materials or evidence that income belongs to the assessee in respect of which it has to disclose the particulars. A distinction has to be drawn where the addition is made by the AO on the basis of the material found in possession of the assessee and the addition made on the basis of material found by the Revenue from extraneous sources. In the former case, the assessee can be charged for concealment of particulars of income or furnishing of inaccurate particulars if it withholds the information or provides inaccurate particulars or fails to offer any explanation or if it is found that assessee is not able to substantiate the explanation in respect of the additions made. But in the latter case the question of giving any information or explanation does not arise unless it is established by the Revenue that income in respect of which an addition is made actually belongs to the assessee on the basis of undisputed material or evidence found by the Revenue. In the present case, the stand of the Revenue is that Miss Rekha Ganeshan had purchased the jewellery from the assessee. The material relied upon by the Revenue is the statement recorded under s. 132(4) in the course of the search at her residence. That statement, in our opinion, may be relevant for making an addition in her case, but it certainly cannot be the sole basis for making the addition in the hands of the assessee unless the assessee is given an opportunity to rebut the same. The Revenue has made inquiries from the employees of the assessee who could not tell anything in this regard. Miss Rekha Ganeshan was examined by the AO in the course of the assessment proceedings in the case of assessee. Her statement does not establish that the jewellery was purchased from the assessee. It has been stated by her in the statement that she visited the shop of the assessee but somebody was introduced by the partner of the firm through whom the alleged purchase of jewellery was made. The answer to question No. 2 is reproduced as under :
"Ans. (2) - On 14th May, 1981, I had visited TBZ & Sons, Opera House, Bombay for purchase of jewellery in the premises of TBS & Sons, Opera House, Bombay. The jewellery was shown by a person who was introduced as a broker by their partner Shri Vajubhai. On finalisation of the deal, cash was handed over to the same person in the presence of Vajubhai."
14. The statement of Miss Rekha Ganeshan, in our opinion, creates some doubt or suspicion but that by itself cannot establish the stand taken by the Revenue. It is also pertinent to note that in spite of the request made by the assessee, the AO had not allowed the assessee to cross-examine her as is apparent from the letter of the assessee dt. 26th March, 1987, addressed to the ITO, Central, VI, Bombay. That, in our opinion, amounts violation of principles of natural justice. Hence, we are of the view that the Department has not been able to prove that it represents the income of the assessee much less the 'concealment'. Merely because the income has been surrendered by the assessee in order to buy peace with the Department, the assessee cannot be penalised. It is, therefore, held that the CIT(A) was justified in deleting the penalty in respect of such addition.
15. The next category of addition of Rs. 4.5 lakhs is on account of disallowance of interest in respect of loans pertaining to earlier years. We find that the settlement petition of the assessee for earlier year has been admitted by the Settlement Commission and it has been directed by the Settlement Commission to waive the penalty leviable under s. 271(1)(c) and under s. 273. The relevant portion of the order of Settlement Commission is being reproduced as under :
"No interest is chargeable under s. 139(8) for any of these four years. Interest under s. 215/217/217(1A) is also not chargeable for the asst. yr. 1979-80. As for the other three assessment years, interest under s. 215/217/217(1A) will be charged from the 1st April of the relevant assessment year upto a date which falls one year from the date of filing of the return. No penalty is leviable under s. 271(1)(a) for any of the years. Penalties leviable under ss. 271(1)(c) and 273 are waived. The petitioner is also granted immunity under s. 245H from prosecution under any provisions of the IT Act."
It may be mentioned that the settlement petition was concerned with asst. yrs. 1979-80 to 1981-82 and 1983-84. The interest of justice, therefore, demands that no penalty should be levied in respect of the asst. yr. 1982-83. Hence, we uphold the order of the CIT(A) in respect of the aforesaid amount.
16. Now we are left to consider the levy of penalty under s. 271(1)(c) with reference to surrender of cash credits of Rs. 9,10,000 and interest thereon amounting to Rs. 97,985. The list of the cash creditors which are to be considered by us is as under :
Rs.
(i) M/s Uday Trading Co. 50,000 (ii) Jain Trading Co. 50,000 (iii) Mehta Enterprises 50,000 (iv) Ratan Trading & Co. Rs. 50,000 (v) Gautam M. Jain 50,000 (vi) Kesri Textiles 50,000 (vii) Saraswati Trading Co. 50,000 (viii) Kiranraj C. Mehta 50,000 (ix) Manjula Enterprises 50,000 (x) Gajendra Trading Co. 50,000 (xi) Mamta Trading Co. 50,000 (xii) Ratan & Co. 35,000 (xiii) Kiran Textiles 35,000 (xiv) Ajit R. Bagkar 25,000 (xv) Padam & Co. 1,00,000 (xvi) Shri Rameshchand M. Jain 50,000 (xvii) Bipinchandra & Co. 50,000 (xviii) Jagdishraj C. Mehta 50,000 (xix) Arunodaya & Co. 50,000 (xx) Ashok Bansilal Singhvi 25,000 (xxi) Daga & Co. 1,00,000 (xxii) Ganeshmal Maneklal 1,00,000 (xxiii) K. B. Shah (HUF) 20,000
It is clear from the facts that assessee had filed confirmation certificates along with GIR numbers in respect of such cash credits. The AO not being satisfied with such confirmations issued summons under s. 131 to them at the addresses furnished by the assessee which remained unserved as these parties were not existing at such addresses. It is also an admitted fact that the AO made inquiries from their respective income-tax wards and found that most of them were not on the income-tax records. The AO, therefore, issued letter dt. 17th Dec., 1985, to the assessee confronting with this fact and requested the assessee to produce the cash creditors. The list of the parties not found in the IT records was given in that letter. Again in the penalty proceedings this fact was also confronted by the AO to the assessee vide his letter dt. 18th Jan., 1989. Thereafter another opportunity which was finally given to the assessee to produce them by his letter dt. 25th Jan., 1989, as the assessee recently had been able to obtain their affidavits. In spite of all these opportunities, assessee was not able to rebut the stand of the Revenue, regarding identity and genuineness of the cash creditors.
17. After perusing the above facts, we have to categorise the cash credits into two parts. First those cash credits in respect of which the AO has found that the particulars given by the assessee were inaccurate and second those cash credits where particulars given by the assessee remained uncontroverted. The former category includes the cash credits appearing at serial Nos. 1 to 15 mentioned in para 16 amounting to Rs. 7.45 lakhs. This has been found by us from the perusal of the list of the parties not found on the IT records as per the letter of the AO dt. 17th Dec., 1985. In the second category cash credits appearing at serial Nos. 16 to 22 mentioned in para 16 are included which amounts to Rs. 3.75 lakhs. In our opinion, the Revenue has been able to rebut the explanation given by the assessee by giving a finding that particulars given in respect of cash credits in the first category mentioned above are inaccurate inasmuch as on inquiries made by the AO from their respective wards, it was found that those cash creditors did not exist. In spite of confronting such facts to the assessee it has not been able to rebut the allegation of the AO. If the particulars were correct there was nothing which could stop the assessee in producing the proper material or evidence at least in the penalty proceedings. The producing of copies of affidavits in penalty proceedings did not advance the case of the assessee. If the assessee could obtain the affidavits nothing prevented it to produce them before the AO, when proper opportunity was given by the AO. Those creditors were not found on the IT record and this finding of the Revenue has not been rebutted by the assessee by any material or evidence. Therefore, in our opinion, assessee has not been able to rebut the stand of the Revenue. The reliance of the assessee on the decision of the apex Court in the case of Orissa Corporation (supra), is misplaced. The ratio of that judgment is that where the assessee had furnished all the particulars including GIR numbers and the AO had not made any inquiry from their respective wards, then the Tribunal was justified in coming to the conclusion that assessee had discharged its onus and no penalty could be imposed. That clearly shows that it would not cover those cases where the AO on inquiry from their respective wards finds that particulars given by the assessee are not correct. Therefore, in our opinion, the judgment of the Hon'ble Supreme Court does not help the assessee. Hence, we hold that the assessee has furnished inaccurate particulars in respect of the cash credits mentioned above in the first category amounting to Rs. 7.45 lakhs and thereby has concealed the income to that extent. The penalty leviable in respect of the aforesaid amount and interest thereon is, therefore, sustained.
18. As far as cash credits falling in the second category amounting to Rs. 3.75 lakhs and interest thereon are concerned, we are of the opinion that no penalty can be levied inasmuch as the Revenue has not been able to establish that the particulars filed by the assessee were inaccurate. The assessee has given all the particulars including the GIR numbers. The AO has made his own inquiries and nothing against them has been found by him. Merely because, summons were not served on them, assessee cannot be penalised. The ratio of the judgment of the apex Court in the case of Orissa Corpn. (supra) squarely applies in respect of such cash credits. Hence, we uphold the order of the CIT(A) in respect of such cash credits.
19. Lastly before, parting with our judgment, we would like to mention the judgment of the Supreme Court in the case of Varkey Chacko (supra), on which reliance has been placed by the assessee. In that case the Supreme Court was concerned with the issue regarding the jurisdiction of the authority who could impose the penalty. The learned counsel for the assessee relied upon certain observations to the effect that penalty could be imposed only where the AO is satisfied that there has been concealment or furnishing of inaccurate particulars. In the present case, we have sustained the penalty only in respect of those cash credits where the AO has found that the particulars furnished by the assessee were inaccurate. On the contrary, we have upheld the deletion of the penalty where the AO could not find anything against the assessee in respect of the particulars furnished by it. Therefore, the conclusion at which we have arrived is fully supported by the observations of the Hon'ble Supreme Court in this case. We are also of the view that the reliance placed by the CIT(A) on the following observations of the Supreme Court in the case of Sir Shadilal Sugar & General Mills (supra) is also misplaced :
".... From agreeing to additions, it does not follow that the amount agreed to be added was concealed income. There may be a hundred and one reasons for such admission, i.e., when the assessee realises the true position, it does not dispute certain disallowances but that does not absolve the Revenue from proving the mens rea of a quasi criminal offence....."
The aforesaid observations clearly show that where there is addition on agreed basis, no penalty can be levied on such basis. But it has been further observed that Revenue is not debarred from proving the mens rea. That means that only in such case the penalty can be levied where the Revenue can establish that either there is concealment or furnishing of inaccurate particulars of income. The Hon'ble Supreme Court was considering the case where under s. 28 of the old IT Act the word 'deliberately' was appearing before the words 'furnishes the inaccurate particulars of such income'. The word 'deliberately' has been omitted by the legislature. So, it is sufficient if the AO brings material to prove that particulars furnished by the assessee are inaccurate. In the present case, the AO has been able to show that assessee has furnished inaccurate particulars to the extent of cash credits amounting to Rs. 7.45 lakhs.
20. In view of the above discussions and the finding given by us, we modify the order of the CIT(A) and direct the AO to recompute the penalty under s. 271(1)(c) in the light of the observations made by us.
21. Now, we take up the appeal involving the issue relating to penalty under s. 273. After hearing both the parties we are unable to uphold the order of the CIT(A). He has cancelled the penalty merely on the ground that the amnesty scheme is applicable to the assessee. As we have already held that benefits under the amnesty scheme could not be given to the assessee, the impugned penalty order cannot be sustained. Since, he has not decided the appeal on merits, we, in the interest of justice, set aside the order of the CIT(A) and restore the matter for adjudication on merits.
22. In the result, ITA No. 7530/Bom/89 relating to penalty under s. 271(1)(c) is partly allowed while ITA No. 7531/Bom/89 relating to penalty under s. 273 is allowed for statistical purposes.