M/s. Sainath Enterprises, Nashik V. Income-tax Officer,

CO 31/PUN/2016

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2586 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 20-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Assessee Lawyers: MUKESH ADWANI
• Keywords: Income from undisclosed sources; Loose papers; Onus to prove
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1655/PN/2014 '% % / ASSESSMENT YEAR : 2003-04 ITO, WARD-2(1), NASHIK . / APPELLANT V/S M/S. SAINATH ENTERPRISES, WING NO.5, STADIUM COMPLEX, M.G. ROAD, NASHIK 422 001 PAN : AAMFS9476Q . / RESPONDENT CO NO.31/PN/2016 (ARISING OUT OF ITA NO.1655/PN/2014) '% % / ASSESSMENT YEAR : 2003-04 M/S. SAINATH ENTERPRISES, WING NO.5, STADIUM COMPLEX, M.G. ROAD, NASHIK 422 001 PAN : AAMFS9476Q . / APPELLANT V/S ITO, WARD-2(1), NASHIK . / RESPONDENT ASSESSEE BY : SHRI MUKESH ADWANI REVENUE BY : SHRI ANIL KUMAR CHAWARE / ORDER PER R.K.PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE RE VENUE AND THE SECOND ONE FILED BY THE ASSESSEE AND ARE DIRECT ED AGAINST THE ORDER DATED 16-06-2014 OF THE CIT(A)-II NASHIK RELA TING TO ASSESSMENT YEAR 2003-04. / DATE OF HEARING :04.10.2016 / DATE OF PRONOUNCEMENT: 30 .11.2016 2 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 2. THE REVENUE IN THE GROUNDS OF APPEAL HAS CHALLENGED THE ORDER OF THE CIT(A) IN REDUCING THE LEVY OF PENALTY UNDER S ECTION 271(1)(C) OF THE I.T. ACT FROM 200% LEVIED BY THE ASSESSING O FFICER TO 100% WHEREAS THE ASSESSEE IN THE GROUNDS OF APPEAL HA S CHALLENGED THE VERY LEVY OF PENALTY. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTIO N. IT FILED ITS RETURN OF INCOME ON 2-12-2003 DECLARING TOTAL LOSS OF RS.1,41,87,270/-. IN THIS CASE A SURVEY U/S.133A OF THE I. T. ACT WAS CONDUCTED ON 06-03-2003. DURING THE SAID SURVEY IT WAS NOTED THAT AS AGAINST CASH BALANCE OF RS.1,61,293/- AS ON 05-0 3-2003 AS PER THE COMPUTER SHEET OF CASH BOOK, ACTUAL CASH FOUND WAS RS.19,61,760/-. THE ASSESSEE COULD NOT EXPLAIN SUCH EXCES S CASH FOR WHICH IT DECLARED A SUM OF RS.18,00,487/- AS ADDITIONAL INC OME FOR A.Y. 2003-04. SIMILARLY CERTAIN LOOSE PAPERS WERE FOUND DURING THE SURVEY PERTAINING TO VARIOUS EXPENSES. THE ASSESSE E IDENTIFIED SUCH EXPENSES AS EXPENSES INCURRED TOWARDS OFFICE FURNITU RE, EXPENSES TOWARDS CONSTRUCTION OF RESIDENTIAL HOUSE OF TH E PARTNER SHRI DIGAMBAR A. PINGLE AND WITHDRAWAL BY PARTNERS FOR HO USEHOLD EXPENSES. THE AMOUNT FOR SUCH EXPENSES WORKED OUT T O RS.22,84,988/-, RS.7,40,660 AND RS.1,73,800/- RESPECTIVELY. O N BEING CONFRONTED BY THE SURVEY TEAM THE PARTNER, NOT B EING IN A POSITION TO GIVE ANY CONVINCING REPLY, SURRENDERED THESE AMOUNT AS UNRECORDED EXPENSES OF THE ASSESSEE AND OFFERED THE SA ME AS ADDITIONAL INCOME FOR A.Y. 2003-04. THUS, THE ASSESSEE DISCLO SED ADDITIONAL INCOME OF RS.50 LAKHS DURING THE SURVEY ON ACCOU NT OF THE FOLLOWING : 3 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 1) EXCESS CASH FOUND RS.18,00,487/- 2) ON ACCOUNT OF EXPENDITURE INCURRED ON OFFICE FURNITURE RS.22,84,988/- 3) ON ACCOUNT OF EXPENDITURE INCURRED ON RESIDENTIAL HOUSE RS.7,40,660/- 4) ON ACCOUNT OF PARTNERS WITHDRAWAL FROM THE FIRM RS.1,73,800/- -------------------- RS.49,99,935/- ROUNDED OFF TO RS.50,00,000/- -------------------- 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER NOTED THAT THE PARTNERS HAVE INTRODUCED ADDITIONA L CAPITAL TO THE TUNE OF RS.1,18,39,485/-, THE DETAILS OF WHICH ARE AS UNDER : SHRI DIGAMBER A. PINGLE RS.31,23,537/- SHRI GANPAT A. PINGLE RS.31,81,140/- SHRI SHIVAJI A. PINGLE RS.30,00,848/- SHRI GOKUL A. PINGLE RS.25,33,960/- --------------------- TOTAL RS.1,18,39,485/- --------------------- 5. ON BEING CONFRONTED BY THE ASSESSING OFFICER IT WAS SUBMITTED THAT THE SAME IS OUT OF THE AGRICULTURAL INCOME OF THE RESPECTIVE PARTNERS WHO HAVE INTRODUCED THE SAME AS C APITAL IN THE BOOKS OF THE FIRM. AFTER CONSIDERING THE EXPENSES FOR SUC H AGRICULTURAL INCOME THE AO ACCEPTED THE AMOUNT OF RS.29,59 ,871/- BEING 25% OF THE CAPITAL INTRODUCED AS OUT OF AGRICULTURAL I NCOME AND TREATED THE BALANCE AS INCOME OF THE FIRM FROM UNDISC LOSED SOURCES. THE ASSESSING OFFICER SIMILARLY MADE CERTAIN OTHER ADDITIONS SUCH AS AMOUNT OF RS.5 LAKHS OUT OF LABOUR CONTR ACTOR PAYMENT, AN AMOUNT OF RS.3 LAKHS OUT OF LABOUR CHARGES AN D AN AMOUNT OF RS. 1 LAKH OUT OF TELEPHONE EXPENSES, VEHICLE EXP ENSES, TRAVELLING EXPENSES, ETC. IN SUM AND SUBSTANCE THE ASSE SSING OFFICER COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF 4 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 RS.5,92,350/- AS AGAINST LOSS OF RS.1,41,87,269/- DECLARED BY THE ASSESSEE. 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). H OWEVER, IN ABSENCE OF ANY APPEARANCE FROM THE SIDE OF THE ASSESS EE THE LD.CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THE ASSESSEE DID NOT PREFER ANY APPEAL BEFORE THE TRIBUNAL AG AINST THE ORDER OF THE CIT(A). IN THE MEANTIME, THE ASSESSING OFFICER HAD INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) READ WITH EXPLAN ATION (1) ON THE AMOUNT OF RS.1,38,79,614/-, I.E. THE AMOUNT OF DISCLOSURE AS ADDITIONAL INCOME OF RS.50 LAKHS DURING THE COU RSE OF SURVEY AND THE AMOUNT OF RS.88,79,614/- WHICH WAS ADDED BY HIM OUT OF THE INTRODUCTION OF CAPITAL BY THE PARTNERS. DURING THE COURSE OF SUCH PENALTY PROCEEDINGS IN ABSENCE OF ANY APP EARANCE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER HE INVOKED T HE PROVISIONS OF SECTION 271(1)(C) READ WITH EXPLANATION (1) AND LEV IED PENALTY OF RS.1,02,01,516/- BEING 200% OF THE TAX SOUGHT T O BE EVADED. 7. BEFORE CIT(A) IT WAS ARGUED THAT THE PARTNERSHIP FIRM H AD CLOSED ITS BUSINESS OPERATION FROM 31-10-2003 ONWARDS AS IT HAD UNDERGONE HUGE FINANCIAL LOSSES. SHRI DIGAMBAR A. PINGLE, WH O IS THE MANAGING PARTNER OF THE FIRM, TOOK OVER ALL THE ASSETS AND LIABILITIES OF THE PARTNERSHIP FIRM FROM 1-11-2003 ONWARDS. DU E TO THE MENTAL CONDITION OF SHRI DIGAMBAR A. PINGLE HE DID NOT AP PEAR BEFORE THE CIT(A) AGAINST THE APPEAL FILED BEFORE HIM IN THE QUANTUM PROCEEDING. IT WAS SUBMITTED THAT THE PARTNERSHIP FIRM C ONSISTS OF 4 PARTNERS. THE ASSESSEE FIRM MAINTAINED COMPUTERISED BOOKS OF ACCOUNT ON MERCANTILE BASIS AND EVEN ON THE DATE OF SUR VEY THE BOOKS OF ACCOUNTS WERE MAINTAINED BY IT. SINCE ON THE DA TE OF 5 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 SURVEY CASH FOUND WAS RS.19,61,780/- AS AGAINST CASH BAL ANCE OF RS.1,61,293/- THE DIFFERENCE OF RS.18,00,487/- WAS DECLARED AS ADDITIONAL INCOME. THE ASSESSEE HAD ALSO DECLARED ADDITIONA L INCOME OF RS.31,99,448/- ON ACCOUNT OF EXPENDITURE INCURRED ON OFFICE FURNITURE, EXPENSES INCURRED ON RESIDENTIAL HOUSE OF PA RTNER AND WITHDRAWALS BY THE PARTNERS FROM THE FIRM. THERE WAS NO OTHER INCOME WHICH WAS OFFERED FOR TAX DURING THE SURVEY PROCEEDINGS. 8. IT WAS SUBMITTED THAT THE ASSESSEE HAD EXPLAINED WIT H FULL DETAILS REGARDING THE INTRODUCTION OF CAPITAL BY THE PARTNE RS IN THE FIRM. HOWEVER, THE ASSESSING OFFICER LEVIED PENALTY ON ACCOUNT OF THE ADDITIONAL INCOME DECLARED DURING THE SURVEY AT RS.88,79,614/-. IT WAS EXPLAINED THAT DURING THE ASSESSME NT PROCEEDINGS THE ASSESSEE SUBMITTED THE BALANCE SHEET A ND CAPITAL ACCOUNT OF EACH OF THE 4 PARTNERS WHO HAD INTRODUCED C ASH IN THE BOOKS OF THE FIRM. THEIR STATEMENTS ON OATH WERE RECORD ED BY THE ASSESSING OFFICER. THEY HAD GIVEN DETAILS OF AGRICULTURAL LAND HOLDING, AGRICULTURAL INCOME FROM SUCH LAND AND THE AMOUNT INVESTED BY THEM. ON THE BASIS OF SUCH STATEMENT RECO RDED AND DOCUMENTARY EVIDENCES FILED, THE ASSESSING OFFICER ESTIMATED 25% OF RS.1,18,39,485, I.E. RS,29,59,871/- AS AMOUNT INVESTED BY ALL THE FOUR PARTNERS IN THE BOOKS OF THE ASSESSEE FIRM FROM A GRICULTURAL ACTIVITIES AND THE REMAINING RS.88,79,614/- WAS ADDED BY H IM AS INCOME FROM UNDISCLOSED SOURCES. 9. IT WAS ARGUED THAT THERE IS NO INACCURATE PARTICULAR S OF INCOME FURNISHED BY THE FIRM TO THE ASSESSING OFFICER. THE A SSESSEE FIRM HAD FURNISHED THE NAMES OF THE PARTNERS WHO HAVE INT RODUCED CASH, THEIR RESPECTIVE AMOUNTS INTRODUCED, THEIR PAN NUMB ERS AND ADDRESS. EACH OF THEM HAS CONFIRMED THAT HE HAS INTRODU CED THE 6 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 RESPECTIVE AMOUNT TOWARDS HIS CAPITAL. THE PROVISIONS OF EXPLANATION (1) TO SECTION 271(1)(C) WAS EXPLAINED TO THE CIT(A ). THE DECISION IN THE CASE OF RELIANCE PETROPRODUCTS AND VARIOUS OTHER DECISIONS WERE ALSO CITED TO THE PROPOSITION THAT NO PENA LTY IS LEVIABLE. 10. BASED ON THE ARGUMENTS ADVANCE BY THE ASSESSEE THE LD.CIT(A) DIRECTED THE ASSESSING OFFICER TO RESTRICT THE PEN ALTY TO 100% OF THE TAX SOUGHT TO BE EVADED AS AGAINST 200% LE VIED BY HIM. THE RELEVANT OBSERVATION OF THE CIT(A) READS AS UNDER : 12. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AS THEY EMERGE FROM ASSESSMENT ORDER PASSED U/S 143(3) AS WELL AS FROM THE IMPUGNED PENALTY ORDER & THE SUBMISSIONS MADE IN APPEAL . SECTION 271(1) (C) OF THE ACT, READS AS UNDER: '27. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICE S, CONCEALMENT OF INCOME, ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (A PPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON ** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, (III) IN THE CASES REFERRED TO IN CLAUSE (C), IN AD DITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOU GHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME DEPUTY COMMISSIONER (APPEALS) OR THE COMMISSIONER ( APPEALS) TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING 'THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 12.1 ACCORDING TO LAW LEXICON, THE WORD 'CONCEAL' I S ROOTED IN THE LATIN 'CONCELARE' WHICH IMPLIES TO HIDE. IT MEANS TO WITHDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEALMEN T IS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THER EOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES. THE WORDS 'P ARTICULARS OF INCOME' REFER TO FACTS THAT LEAD TO THE CORRECT COM PUTATION OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. IN OTHER W ORDS, WHEN ANY FACT MATERIAL TO THE DETERMINATION OF AN ITEM AS INC OME OR MATERIAL TO THE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH I S FILED IS NOT ACCURATE, THEN THE APPELLANT WOULD BE LIABLE TO PEN ALTY UNDER S. 271(1)(C) OF THE ACT. THROUGH THESE TWO LIMBS, PENALT Y U/S 27L(1)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONCEALED THE PARTI CULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH IN COME. 12.2 IT IS A WELL-ESTABLISHED PRINCIPLE THAT PENALTY U /S 271(1)(C) IS NOT LEVIABLE WHERE THERE EXISTS A MULTIPLICITY OF POSSI BLE PERSPECTIVES AS HAS BEEN HELD IN THE DECISION RENDERED IN CASES OF AJ AIBSINGH & CO. REPORTED AT 253 ITR 630(P & H), HARSHVARDHAN CHEMICA LS & MINERALS LTD. REPORTED AT 114 ITR 377 (BORN.), KALYANI ENTER PRISES REPORTED AT 83 ITD 764 (MAD TRIB), NATIONAL TEXTILES VIS. CIT RE PORTED AT 249 ITR 125 (GUJ.), INDERSONS LEATHERS REPORTED AT 328 ITR 167 (P & H) AND GUJRAT CREDIT CORPORATION LTD. V. ACIT 116 TTJ (SB) (AHD) 619, TO CITE BUT A FEW. 12.3 IN THE CASE COMMISSIONER OF INCOME-TAX V. ANWAR A LI (1970) 76 ITR 696 (SC), THE APEX COURT HELD AS FOLLOWS : BEFORE PENALTY CAN BE IMPOSED THE ENTIRELY OF CIRCU MSTANCES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISPU TED AMOUNT REPRESENTED INCOME AND THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS. 12.4 IN THE CASE OF CIT VS. KHODAY ESWARSA & SONS REPORT ED AT 83 ITR 369 (SC), THE HONBLE COURT HELD AS FOLLOWS : 'FROM THE ABOVE IT IS CLEAR THAT PENALTY PROCEEDINGS BEING PENAL IN CHARACTER, THE DEPARTMENT MUST ESTABLISH THAT TH E RECEIPT OF THE AMOUNT IN DISPUTE CONSTITUTES INCOME OF THE ASSESSEE. APART FROM THE FALSITY OF THE EXPLANATION GIVEN BY ASSESS EE THE DEPARTMENT MUST HAVE BEFORE LEVYING PENALTY COGENT MATERIAL OR EVIDENCE FROM WHICH IT COULD BE INFERRED THAT THE A SSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS IN RESPECT OF THE SAME AND THAT THE DISPUTED AMOUNT IS A REVENUE RECEIPT. NO DOUBT THE ORIGINAL ASSESSMENT PROCEEDINGS, FOR COMPUTING THE TAX MAY BE A GOOD ITEM OF EVIDENCE IN THE PENALTY PROCEEDIN GS BUT THE PENALTY CANNOT BE LEVIED SOLELY ON THE BASIS OF THE REASONS GIVEN IN THE ORIGINAL ORDER OF ASSESSMENT. 13. IN THE PRESENT CASE, THE PENALTY IS LEVIED WITH RE FERENCE TO THE TWO ADDITIONS MADE BY THE ASSESSING OFFICER DURING ASSESSMENT. T HE FIRST WAS THE ADDITION OF RS. 50,00,000/- BEING UNACCOUNTED CASH & EXPENSES FOUND DURING THE SURVEY PROCEEDINGS, WHICH WAS AGREED DURING THE SURVEY PROCEEDINGS BUT LATER ON RETRACTED BY THE APPELLANT, 8 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 AS THEY STATED THAT THIS AMOUNT WAS RECEIVED FROM THE A GRICULTURAL INCOME/RECEIPTS WHICH WAS INTRODUCED BY ALL THE FOUR PARTNERS OF THE FIRM AMOUNTING TO RS. 1,18,39,485/-. 14. THE SECOND ADDITION ON WHICH PENALTY HAS BEEN LEV IED BY THE ASSESSING OFFICER IS ON RS. 88,79,614/-. AS PER THE AO'S O RDER, THIS AMOUNT IS DETERMINED BY ESTIMATING 25% OF RS.,18,39,48 5/- WHICH WORKS OUT TO RS. 29,59,871/-. THIS AMOUNT OF RS. 29,5 9,871/- (25% OF RS. 1,18,39,485/-) IS TREATED AS GENUINE AGRICULTURAL INCOME WHICH IS INVESTED BY ALL THE FOUR PARTNERS OF THE FIRM & THE R EMAINING AMOUNT OF RS. 88,79,614/- (I.E. RS.1,18,39,485 LESS RS. 29,59,871) IS TREATED AS INCOME FROM UNDISCLOSED SOURCES. 15. AT THE OUTSET, THE PENALTY HAS BEEN LEVIED ON RS. 50,00,000/- PLUS RS.88,79,614/- TOTALLING TO RS. 1,38,79,614/- WHEREAS THE SOURCE OF BOTH THE ADDITIONS IS RS. 1,18,39,485/-, HENCE THE PEN ALTY SHOULD BE RESTRICTED TO RS. 1,18,39,485/- AND NOT ON RS. 1,38,79 ,614/-. THE FACTS OF THE CASE ARE THAT THE PARTNERS OF THE FIRM HAVE I NTRODUCED CAPITAL FUNDS AMOUNTING RS. 1,18,39,485/- AND THE SOURCES OF TH E FUNDS HAVE PURPORTEDLY COME FROM THE AGRICULTURAL INCOME OF TH E PARTNERS. THE A.O. WAS NOT SATISFIED WITH THE EXPLANATIONS OFFERED BY THE PARTNERS AS THEIR EXPLANATIONS WERE NOT SUPPORTED BY PROPER AND C ONCRETE EVIDENCES. FOR INSTANCE, THE PARTNERS COULD NOT EXPLAI N THE CAPITAL INTRODUCED IN THEIR NAMES, AND THEIR CAPITAL ACCOUNT S. DETAILS INCLUDING BALANCE SHEETS WERE NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCES SUCH AS AGRICULTURAL RECEIPTS, EXPENSES INCURRED IN AGRI CULTURAL ACTIVITIES, ETC. AS THEIR KNOWN AGRICULTURAL RECEIPTS ARE SMALL, THEY HAVE NO EXPLANATION FOR THE HUGE AMOUNTS INTRODUCED INTO THE FIRM. UNDER SUCH CIRCUMSTANCES, THE A.O. HAD COME TO THE CONCLUSION THAT 25% (RS. 29,59,871/-) OF THE CAPITAL INTRODUCED AMOUNTING TO RS.1,18,39,485/- SHOULD BE TREATED AS EXPLAINED AND THE BALANCE AMOUN T OF RS. 88,79,614/- WAS CONSIDERED AS UNDISCLOSED INCOME OF THE FIRM OF THE YEAR IN QUESTION. THE A.O. HAD DONE THIS BECAUSE THE PARTNERS HAD SOME LANDS WHICH WOULD HAVE 'YIELDED SOME AGRICULTURAL INC OME. THE A.O. HAD ALSO ADDED RS. 50,00,000/- ON ACCOUNT OF EXCESS CASH , UNEXPLAINED EXPENSES, ETC. DISCOVERED DURING THE SURVEY OPERATION. THE A.O. HAD IMPOSED PENALTY ON RS.88,79,614/- AND RS. 50,00,000/-. NOW, THE QUESTION IS WHETHER THE UNEXPLAINED CASH AN D EXPENSES OF RS. 50,00,000/- UNEARTHED DURING THE SURVE Y OPERATION ARE RELATED TO THE CAPITAL INTRODUCED INTO THE FIRM BY PARTNERS OR INDEPENDENT OF THEM. THIS QUESTION CAN NEVER BE ANSWER ED WITH CERTAINTY AND ACCURACY. SOME PORTION OF SUCH EXPENSES OR EXCESS CASH CAN BE FROM OR OUT OF THE CAPITAL INTRODUCED BY THE PARTNERS. BUT THIS WILL REMAIN GUESS WORK. WHAT IS CERTAIN IS THAT THE PAR TNERS HAVE INTRODUCED RS.1,18,39,485/- AS CAPITAL. THE DISPUTE IS WHETHER THE SAID CAPITAL INTRODUCED IS EXPLAINED OR UNEXPLAINED. IN M Y CONSIDERED VIEW, THE CAPITAL INTRODUCED BY THE PARTNERS HAVE NOT BEEN EXPLAINED. THE PARTNERS HAVE SHOWN SOME AGRICULTURAL LANDS AND SOME SMA LL INCOME FROM SUCH LANDS, BUT SUCH SMALL AGRICULTURAL INCOME CA N TAKE CARE OF ONLY THEIR DAILY REQUIREMENTS. THERE IS NO MONEY LEFT WITH THEM FOR PUTTING INTO THE FIRM AS CAPITAL. IT IS ALSO A REASONA BLE CONCLUSION THAT THE ENTIRE CAPITAL FUNDS INTRODUCED BY THEM ARE UNEX PLAINED AND THE EXCESS CASH AND UNEXPLAINED EXPENSES UNEARTHED DURING TH E SURVEY OPERATION ARE FROM OR OUT OF THE SAID CAPITAL FUNDS I NTRODUCED BY THE PARTNERS. THEREFORE, THE PENALTY U/S 271(1)(C) OF THE I.T. ACT SHOULD BE IMPOSED ON RS.1,18,39,485/-. HENCE, THE INCOME SOUGHT TO BE EVADED WOULD NOW BE RS.1,18,39,485/- AND THE TAX ON RS.1,18, 39,485/- WOULD 9 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 AMOUNT TO RS.43,65,760/-. THIS VIEW HAS BEEN TAKEN TO BRING AN END TO THE DISPUTE BETWEEN THE APPELLANT AND THE DEPARTMENT . 16. THE QUANTUM OF PENALTY WILL DEPEND ON THE SEVERI TY OF THE EVASION OF TAX AND THE NATURE OF CONCEALMENT OR FURNISHING I NACCURATE PARTICULARS OF ITS INCOME . AS REGARDS LEVYING OF PENA LTY AT 200% ON THE TAX OF RS. 43,65,760/- SOUGHT TO BE EVADED, IN MY CO NSIDERED VIEW, THE SAME IS ON THE HIGHER SIDE MAINLY BECAUSE OF THE FACT T HAT THE DEPARTMENT HAS TAKEN STATEMENTS ON OATH FROM ALL THE P ARTNERS OF THE FIRM & VISITED THEIR RESIDENCE & CONFIRMED THE FACT T HAT NOT ONLY DO THEY POSSESS AGRICULTURAL LANDS BUT ALSO HAVE SOME AGRICUL TURAL INCOMES. THE ASSESSING OFFICER HAS ALSO ESTIMATED THE AGRI CULTURAL INCOME TO THE EXTENT OF RS. 29,59,871/- AS GENUINE AN D MADE THE ADDITION OF THE REMAINING AMOUNT AS UNEXPLAINED. THE PENALTY LEVIED BY THE A.O. IS ENTIRELY BASED ON THE ADDITION MADE IN THE ORIGINAL ASSESSMENT ORDER AND UNDISCLOSED SOURCES DETERMINED BY THE A.O., 'WHICH BECAME FINAL BECAUSE THE APPELLANT DID NOT AT TEND THE APPELLATE AND PENALTY PROCEEDINGS. UNDER SUCH CIRCUMSTANCES, I RE STRICT THE PENALTY TO 100% OF THE TAX SOUGHT TO BE EVADED. 11. AGGRIEVED WITH SEARCH ORDER OF THE CIT(A) THE REVEN UE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE US. 12. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLEN GED THE ORDER OF THE CIT(A) IN SUSTAINING PENALTY TO THE EXTENT OF 100% OF THE TAX SOUGHT TO BE EVADED. HE SUBMITTED THAT THE FIR M WAS CLOSED W.E.F. 31-10-2003 AND THE ASSESSMENT ORDER WAS PASSED O N 28-03- 2006. REFERRING TO PAGES 118 TO 119 OF THE PAPERWORK HE DREW THE ATTENTION OF THE BENCH TO THE ORDER PASSED U/S.189(3) OF THE ACT ON 19-01-2010. HE SUBMITTED THAT THE ADDITION HAS BEEN MA DE ON ACCOUNT OF TWO COUNTS, I.E.(1) ADDITION OF RS.50 LAKHS DECLARE D DURING THE COURSE OF SURVEY AS UNDISCLOSED INCOME AND (2) RS.89,79,614/- BEING THE CAPITAL INTRODUCED BY THE PARTNER S TREATED AS UNDISCLOSED INCOME OF THE FIRM. HE SUBMITTED THAT THE P ARTNERS HAVE INTRODUCED RS.1,18,39,485/- OUT OF WHICH THE AMOUNT O F RS.50 LAKHS HAS BEEN INCURRED AS EXPENDITURE. THEREFORE, THE REVENUE CANNOT PENALIZE THE ASSESSEE FOR THE SOURCE AS WELL AS APPLICATION. 10 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 13. REFERRING TO PAGES 189 TO 193 OF THE PAPER BOOK H E DREW THE ATTENTION OF THE BENCH TO THE DOCUMENTARY EVIDENCE FOR AGRICULTURAL INCOME OF THE PARTNERS. REFERRING TO PAGES 194 TO 237 O F THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENT ION OF THE BENCH TO THE DOCUMENTARY EVIDENCE FOR EXPENSES INCURRE D ON AGRICULTURAL PRODUCE BY THE PARTNER. REFERRING TO PAGES 238 TO 243 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH T O THE DOCUMENTARY EVIDENCE TO PROVE THE OWNERSHIP OF AGRICULTU RAL LAND IN THE NAME OF ALL THE 4 PARTNERS. REFERRING TO PAGES 2 44, 149 & 250 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE RETURN FILED B Y SHRI DEVIDAS ANANDRAO PINGLE, ONE OF THE PARTNERS. REFERRING T O PAGES 245 TO 248 AND 255 OF THE PAPER BOOK HE DREW THE ATT ENTION OF THE BENCH TO THE COPY OF CAPITAL ACCOUNT, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE F.Y. 31-03-2002 RELEVANT TO A.Y. 2002 -03. REFERRING TO PAGES 245 TO 255 OF THE PAPER BOOK HE DR EW THE ATTENTION OF THE BENCH TO THE COPY OF CAPITAL ACCOUNT, BA LANCE SHEET AND INCOME-TAX RETURN FILED BY SHRI DEVIDAS ANANDRAO PING LE SHOWING HIS AGRICULTURAL INCOME. REFERRING TO PAGES 256 TO 262 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE DETAILS OF CAPITAL ACCOUNT, BALANCE SHEET, PROFIT AND LOSS ACCOUNT FOR DIFFERENT YEARS SHOWING THE DECLARATION OF AGRICULTURAL INCOME. HE SU BMITTED THAT SHRI DEVIDAS ANANDRAO PINGLE HAS DECLARED AGRICULTURAL INCOME OF RS.2,75,000/- FOR A.Y. 2002-03, RS.6,85,795/- FOR A.Y. 203-04, RS.9,69,658/- FOR A.Y. 2004-05, RS.26,37,410/- FOR A.Y. 2006-07 AND SO ON. REFERRING TO VARIOUS OTHER PAGES OF THE PAP ER BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE AGRICULTURAL INCOM E DECLARED BY THE OTHER PARTNERS. 11 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 14. HE SUBMITTED THAT WHEN THE PARTNERS HAVE SUFFICIENT AGRICULTURAL INCOME, THEREFORE, MERELY BECAUSE THE ASSESS ING OFFICER ESTIMATED THE SAME AT 25% AND THE ASSESSEE DID NOT PR EFER ANY APPEAL FOR SOME REASON OR THE OTHER, THE SAME CANNOT BE A GROUND FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. HE SUBMITTED THAT WHEN THE PARTNERS ARE INCOME-TAX PAYERS, THEN ADDITION, IF ANY, COULD HAVE BEEN MADE IN THEIR RESPECTIVE HANDS AND ADDIT ION SHOULD NOT HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE FIRM. FOR THE ABOVE PROPOSITION, HE REFERRED TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BOMBAY PIPE TRAD ERS REPORTED IN 213 ITR 282. 15. REFERRING TO THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 ITR 158 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCU RATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURAT E PARTICULARS. HE ALSO RELIED ON THE DECISION OF THE HONBLE MADHYAPRADESH HIGH COURT IN THE CASE OF CIT VS. RATANLAL MISHRILAL REPORTED IN 143 ITR 929 AND DREW THE ATTENTION OF THE BENCH TO THE HEAD NOTES OF THE ORDER AND SUBMITTED THAT THE FACTS O F THE ABOVE CASE ARE IDENTICAL TO THE FACTS OF THE PRESENT CASE. 16. REFERRING TO THE DECISION OF HONBLE PATNA HIGH COURT IN THE CASE OF CIT VS. NIPANI TOBACCO STORES REPORTED IN 145 I TR 128 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISIO N HAS HELD THAT WHENEVER THE EXPLANATION (1) TO SECTION 271(1)(C) OF THE ACT IS ATTRACTED, THE INITIAL BURDEN OF PROOF IS UPON THE ASSESSE E. IF THE 12 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 BROAD PROBABILITIES OF THE EXPLANATION OFFERED BY THE ASSESS EE ARE SUCH AS MAY BE BELIEVED, THOUGH NOT SUFFICIENT FOR CONCLUS IVE PROOF, THE INITIAL ONUS TO PROVE SUCH A NEGATIVE FACT CAN WELL B E SAID TO HAVE BEEN DISCHARGED BY THE ASSESSEE. ACCORDINGLY, PE NALTY LEVIED ON THE BASIS OF CASH CREDITS FOUND IN THE ACCOUNTS OF THE ASSESSEE BY DISREGARDING THE EXPLANATION OF THE ASSESSEE THAT IT R EPRESENTED LOANS FROM PERSONS AND ASSESSED AS INCOME OF THE ASSESS EE WAS DIRECTED TO BE DELETED. THE APPEAL FILED BY THE REVENUE WAS THUS DISMISSED. HE ALSO RELIED ON THE FOLLOWING DECISIONS : 1. CIT VS. CHANDRAKANT M. TOLIA 195 ITR 593 2. CIT VS. BHAGWAT TOYS AGENCIES 158 ITR 338 3. CIT VS. SEN MUKHERJEE & CO. 159 ITR 793 4. CIT VS. H. ABDUL BAKSHI & BROS 160 ITR 91 17. REFERRING TO THE DECISION OF HONBLE PATNA HIGH COURT IN THE CASE OF CIT VS. CHOTANAGPUR GLASS WORKS REPORTED IN 145 ITR 225 HE SUBMITTED THAT IN THAT CASE CERTAIN CASH CREDITS WE RE ADDED BY THE ASSESSING OFFICER AND PENALTY WAS LEVIED ON ACCOUNT O F CONCEALMENT OF INCOME. THE EXPLANATION OF THE ASSERSSEE W AS ACCEPTED IN RESPECT OF SOME CREDITS. IN RESPECT OF OTH ER CREDITS PLAUSIBLE EXPLANATION COULD NOT BE SUBMITTED ON THE GROUND THAT SOME OF THE PARTIES ARE UNABLE TO DEPOSE BEFORE THE ASS ESSING OFFICER FOR WHICH THE ASSESSEE SURRENDERED THE AMOUNTS FOR ASSESSMENT. IT WAS HELD THAT MERE SURRENDER OF AMOUNT S IS NOT ENOUGH TO JUSTIFY THE IMPOSITION OF PENALTY. THERE WAS NO ADMISSION THAT AMOUNT WAS CONCEALED INCOME. INITIAL ONUS O F ASSESSEE WAS DISCHARGED BY GIVING PLAUSIBLE EXPLANATION. ON US ON DEPARTMENT IS TO SHOW THAT AMOUNT CONSTITUTED CONCEALE D INCOME. IT WAS ACCORDINGLY HELD THAT LEVY OF PENALTY U/S.271(1)(C) OF THE ACT WAS NOT VALID. HE ACCORDINGLY SUBMITTED THAT WHEN THE P ARTNERS HAD EXPLAINED THE SOURCE OF THE INTRODUCTION OF CAPITAL AND THE 13 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 VARIOUS EXPENSES, WHICH WERE NOTED IN THE COMPUTERIZED SHEET, WERE OUT OF THE CASH AVAILABLE IN THE BOOKS AND WERE ALSO ENTERED IN THE BOOKS OF ACCOUNT, THEREFORE, NO PENALTY UNDER THE FAC TS OF THE CASE IS LEVIABLE. HE SUBMITTED THAT MERELY BECAUSE THE A SSESSEE HAS NOT CHALLENGED THE QUANTUM ADDITION IT DOES NOT MEAN THAT LEVY OF PENALTY IS AUTOMATIC. THE ASSESSEE CAN ALWAYS MAKE FR ESH ARGUMENTS BEFORE THE TRIBUNAL FOR CANCELLATION OF LEVY OF PE NALTY. HE ACCORDINGLY SUBMITTED THAT THE PENALTY SUSTAINED BY THE CIT(A) AT 100% OF THE TAX SOUGHT TO BE EVADED SHOULD BE CANCELLED. 18. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE SU BMITTED THAT BECAUSE OF NON APPEARANCE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS THE A SSESSING OFFICER HAS RIGHTLY LEVIED PENALTY @200% OF THE TAX SOUGHT TO BE EVADED. THE LD.CIT(A) WAS NOT JUSTIFIED IN REDUCING THE SA ME TO 100%. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE C IT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 19. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. A SURVEY U/S.133A OF THE ACT WAS CONDUCT ED IN THE BUSINESS PREMISES OF THE ASSESSEE FIRM ON 06-03-2003 DUR ING WHICH CASH AMOUNTING TO RS.19,61,780/- WAS FOUND AS AGAI NST THE CASH BALANCE OF RS.1,61,293/- AS ON 05-03-2003 AS PER TH E COMPUTERIZED SHEET. SINCE THE ASSESSEE COULD NOT RECONC ILE OR EXPLAIN THE DIFFERENCE OF RS.18,00,487/- THE ASSESSEE SURREN DERED 14 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 THE SAME AS ADDITIONAL INCOME. SIMILARLY, ON THE BASIS OF CER TAIN LOOSE PAPERS FOUND SHOWING EXPENDITURE INCURRED ON OFFICE FURNITURE, EXPENDITURE INCURRED ON RESIDENTIAL HOUSE OF PAR TNER AND ON ACCOUNT OF WITHDRAWAL FROM THE FIRM BY THE PARTNERS TH E ASSESSEE SURRENDERED RS.31,99,448/- AS ADDITIONAL INCOME. THUS, IN EFFECT, THE ASSESSEE MADE DISCLOSURE OF ADDITIONAL INCOME O F RS.50 LAKHS DURING THE COURSE OF SURVEY U/S.133A OF THE I .T. ACT. THE ASSESSING OFFICER IN THE ORDER PASSED U/S.143(3) APART FROM MAKING THE ABOVE ADDITION OF RS.50 LAKHS AS ADDITIONAL INCOM E DISCLOSED DURING THE COURSE OF SURVEY MADE FURTHER ADDITIO N OF RS.88,79,614/- ON ACCOUNT OF THE CAPITAL INTRODUCED BY THE PARTNERS. WHILE DOING SO, THE ASSESSING OFFICER ALLOWED 25% OF THE TOTAL CAPITAL INTRODUCED AT RS.1,18,39,485/- AS GENUINE INCO ME FROM AGRICULTURE ACTIVITY AND ADDED THE BALANCE AMOUNT OF RS.88,79,614/- AS INCOME FROM OTHER SOURCES. APART FROM THIS ASSESSING OFFICER HAS ALSO MADE ADDITION OF RS.9 LAKHS ON DIFFER ENT HEADS TO WHICH WE ARE NOT CONCERNED. THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE CIT(A) CHALLENGING THE QUANTUM ADDITION. HOWEVER, DUE TO NON APPEARANCE THE APPEAL WAS DISMISSE D BY THE CIT(A) AND ASSESSEE DID NOT PREFER ANY APPEAL BEFORE THE TRIBUNAL. 20. WE FIND THE ASSESSING OFFICER LEVIED PENALTY @200% OF TH E TAX SOUGHT TO BE EVADED ON THE ABOVE TWO AMOUNTS IN THE EXPARTE ORDER PASSED BY HIM. WHILE DOING SO, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF EXPLANATION (1) TO SECTION 271(1)(C) OF THE I.T. A CT. IN APPEAL THE LD.CIT(A) RESTRICTED SUCH PENALTY TO 100% OF T HE TAX SOUGHT TO BE EVADED. REASONS FOR SUCH REDUCTION HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. 15 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 21. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESS EE THAT NO PENALTY IS LEVIABLE AT ALL IN THE FACTS OF THE PRESENT CA SE. ACCORDING TO HIM, THE VARIOUS EXPENSES WHICH WERE SURREN DERED DURING THE COURSE OF SURVEY ARE ALREADY APPEARING IN THE BOOKS OF ACCOUNT. THE PARTNERS HAVE INTRODUCED CAPITAL OUT OF THE IR AGRICULTURAL INCOME. THEY HAVE EXPLAINED THE SOURCE BY GIV ING COGENT EVIDENCE SUCH AS EXPENDITURE ON AGRICULTURAL LAND HELD BY THEM AND THEIR RESPECTIVE SPOUSES, THE RETURN OF INCOME OF THE PARTNERS SHOWING DECLARATION OF AGRICULTURAL INCOME, THEIR PA N NUMBERS ETC. THEIR STATEMENTS WERE ALSO RECORDED BY TH E ASSESSING OFFICER AND THEY HAVE CONFIRMED TO HAVE INVESTED THE CAPIT AL IN THE PARTNERSHIP FIRM OUT OF THE AGRICULTURAL INCOME. FURTHER, THE ASSESSING OFFICER BY ACCEPTING 25% OF SUCH INCOME AS GENUIN E IS NOT DOUBTING ABOUT THE AGRICULTURAL ACTIVITY. HE IS ONLY DOUBTING THE QUANTUM OF INCOME. IT IS ALSO HIS ARGUMENT THAT WHEN THE AMOUNT HAS ALREADY BEEN ENTERED IN THE BOOKS OF ACCOUN T AND THE EXPENDITURE HAS BEEN MADE OUT OF SUCH CASH BALANCE LEV Y OF PENALTY ON THE EXPENDITURE IS NOT CORRECT. IN SUM AND S UBSTANCE IT IS ARGUED THAT PENALTY CANNOT BE LEVIED ON THE SOURCE A S WELL AS APPLICATION. 22. WE FIND SOME FORCE IN THE ARGUMENT OF THE LD. COUNSEL FO R THE ASSESSEE. THE INTRODUCTION OF CAPITAL BY THE PARTNERS HAVE BEEN EXPLAINED TO BE OUT OF THEIR AGRICULTURAL INCOME. THE EXTEN T OF AGRICULTURAL LAND AND THE VARIOUS OTHER DETAILS WERE FURNISH ED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS. THE STATEMENT OF THE PARTNERS WERE RECORD ED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEE DINGS AND THEY HAVE CONFIRMED TO HAVE INVESTED THE AMOUNTS IN QUE STION. 16 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 COPY OF CAPITAL ACCOUNT, PROFIT AND LOSS ACCOUNT AND BALANC E SHEET FOR THE YEAR ENDING 31-03-2002 AND 31-03-2003 OF THE 4 PARTNERS WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. A LTHOUGH THEY ARE ALL INCOME TAX ASSESSEES, HOWEVER, WE FIND NOTHIN G HAS BEEN BROUGHT ON RECORD TO SHOW THAT SUCH AGRICULTURAL INCOME IN THEIR RESPECTIVE HANDS HAS BEEN DISBELIEVED BY THE REVEN UE AUTHORITIES AND ACTION HAS BEEN TAKEN TO TREAT THE SAM E AS INCOME FROM OTHER SOURCES. SINCE THE CAPITAL HAS ALREADY BEEN INTRODUCED IN THE PARTNERSHIP FIRM AND ENTERED IN THE BOOKS OF ACCOU NT, THEREFORE, WE FIND MERIT IN THE ARGUMENT OF THE LD. COUNSE L FOR THE ASSESSEE THAT THE EXPENDITURE INCURRED OUT OF SUCH BA LANCE AVAILABLE IN THE BOOKS CANNOT BE BROUGHT TO TAX AND PEN ALTY LEVIED ON THE SAME. THERE MAY BE SO MANY REASONS WHY THE A SSESSSEE DID NOT PREFER ANY APPLE BEFORE THE TRIBUNAL ON ACCOUNT O F ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). HOWEVER, IN OUR OPINION, MERELY BECAUSE THE ADDITION HAS B EEN SUSTAINED THE SAME CANNOT BE A GROUND FOR LEVY OF PENALTY. IT IS TH E SETTLED PROPOSITION OF LAW THAT ASSESSEE CAN ALWAYS MAK E FRESH PLEA DURING THE PENALTY PROCEEDINGS. 23. WE FURTHER FIND FORCE IN THE ARGUMENT OF THE LD. COUNSE L FOR THE ASSESSEE THAT IF AT ALL THE ASSESSING OFFICER DISBELIEVED THE CAPACITY OF THE PARTNERS TO INTRODUCE CAPITAL OUT OF TH EIR AGRICULTURAL INCOME, THEN IN THAT CASE, ADDITION COULD HAVE BEEN MADE IN THEIR RESPECTIVE HANDS WHO ARE ALL INCOME TAX ASS ESSEES AND NO ADDITION COULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE FIRM. 17 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 24. WE FIND THE HONBLE SUPREME COURT IN THE CASE OF RELIAN CE PETROPRODUCTS PVT. LTD. (SUPRA) HAS OBSERVED AS UNDER (SHORT NOTES) : A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF TH E INCOME-TAX ACT, 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF INCOME OF THE ASSESSEE . SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF INC OME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271( 1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INF ORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, T HE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, CAN MAKING AN INCORRECT CLAIM TANTAMOU NT TO FURNISHING INACCURATE PARTICULARS. THERE CAN NO DISPUTE THAT EV ERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE TH AT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN TH E RETURN MUST BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TH E TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED B Y THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1) (C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT A MOUNT TO FURNISHING INACCURATE PARTICULARS. 25. WE FIND THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF RATANLAL MISHRILAL (SUPRA) HAS OBSERVED AS UNDER (SHORT NOTES) : EVEN AFTER IN THE INSERTION OF THE EXPLANATION IN SECTION 271(1)(C) OF THE I.T. ACT, 1961, THE RATIO OF THE SUPREME COURT S DECISIONS IN ANWAR ALIS CASE [1970] 76 ITR 696 AND CIT VS. KHODAY ESWARSA AND SONS [1972] 83 ITR 369, WOULD APPLY AND UNLESS THERE ARE C IRCUMSTANCES TO LEAD TO THE INFERENCE CATEGORICALLY AS TO A CONCEALM ENT OF INCOME, NO PENALTY OUGHT TO BE LEVIED MERELY FOR NOT BEING ABL E TO PROVE THE CASE TO THE HILL AS IN A CRIMINAL PROCEEDING. IT IS WELL ESTABLISHED THAT THE ORDER OF ASSESSMENT IS NOT CONCLUSIVE OF THE FACT THAT TH E AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. BUT IF THE TOTAL INCOME RETURNED IS LESS THAN80% OF THE TOTAL INCOME ASSESSED, THE BURDEN IS ON THE ASSESSEE TO PROVE THAT THE FAILURE TO RETURN THE CO RRECT INCOME DID NOT ARISE FROM FRAUD OR ANY GROSS OR WILLFUL NEGLECT. THE PROOF NECESSARY UNDER THIS EXPLANATION IS NOT ONE AS REQUIRED IN A CRIMINAL CASE. IF THE ASSESSEE HAS TENDERED PROOF OF SUCH EXPLANA TION AND THE DEPARTMENT WAS NOT CONVINCED WITH IT, MERELY ON THE POSSIBILITY OF BEING UNLIKELY, THE CONCLUSION THAT CONCEALMENT WAS E STABLISHED WOULD NOT BE WARRANTED. CASH CREDITS WERE FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AMOUNTING TO RS.22,980. THE EXPLANATION OF THE ASSESSEE THAT THE AMOUNTS WERE LOANS GIVEN BY HIS FATHER WAS DISBELIEVED BY THE ITO AND 18 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 THE AAC ON THE GROUND THAT FATHER DERIVED INCOME FR OM AGRICULTURE AND COULD NOT HAVE SAVED SUCH AN AMOUNT. THE AMOUNT WAS ASSESSED AS THE ASSESSEES INCOME AND PENALTY WAS LEVIED APPLYING THE EXPLANATION TO S.271(1)(C) ON THE SAME BASIS. THE TRIBUNAL DELETED THE PENALTY. ON A REFERENCE : HELD, THAT IN THE INSTANT CASE THE ASSESSEE HAD DISCHARGE D THE BURDEN CAST ON HIM BY THE EXPLANATION TO S. 271(1)(C). HE H AD EXPLAINED THAT THE AMOUNT WAS A LOAN FROM HIS FATHER AND UNLESS THE I. T. AUTHORITIES HAD SOMETHING MORE THAN A MERE ESTIMATE OF THE FATHER S ABILITY TO SAVE THE AMOUNT IN QUESTION, THE GUILT OF CONCEALMENT CO ULD NOT BE HELD TO HAVE BEEN ESTABLISHED. NO PENALTY COULD BE LEVIED IN THE CIRCUMSTANCES OF THE CASE. 26. WE FIND THE HONBLE PATNA HIGH COURT IN THE CASE OF NIP HANI TOBACCO STORES HAS OBSERVED AS UNDER (SHORT NOTES) : WHENEVER THE EXPLN. (1) TO SECTION 271(1)(C) OF THE I.T. ACT, 1961 IS ATTRACTED, THE INITIAL BURDEN OF PROOF IS UPON THE ASSESSEE. IF THE BROAD PROBABILITIES OF THE EXPLANATION OFFERED BY THE ASSESSEE ARE SUCH AS MAY BE BELIEVED, THOUGH NOT SUFFICIENT FOR CONCLUSIVE PROOF, THE INITIAL ONUS TO PROVE SUCH A NEGATIVE FACT CAN WELL BE SAID TO HAVE BEEN DISCHARGED BY THE ASSESSEE. CASH CREDITS WERE FOUND IN THE ACCOUNTS OF THE ASSESSEE A ND THE EXPLANATION OF THE ASSESSEE THAT IT REPRESENTED LOANS FR OM TWO PERSONS WAS NOT ACCEPTED AND THE AMOUNT WAS ASSESSED AS THE INCOM E OF THE ASSESSEE. IN THE QUANTUM APPEAL THE TRIBUNAL WAS OF THE VIEW THAT THE CASH CREDITS REMAINED UNEXPLAINED AND UPHELD THE ADDI TION OF CASH CREDITS AS INCOME OF THE ASSESSEE. PENALTY WAS IMPOSED. I N THE APPEAL AGAINST THE ORDER LEVYING PENALTY THE TRIBUNAL HELD THAT THE EXPLANATION TO S.271(1)(C) WAS ATTRACTED. THE TRIBUN AL, HAVING REGARD TO THE PROBABILITIES, HELD THAT THE BURDEN WAS ON TH E DEPARTMENT TO ESTABLISH THAT THE RECEIPT OF THE AMOUNT IN DISPUTE CO NSTITUTED INCOME OF THE ASSESSEE AND THAT IF THERE WAS NO EVIDENCE ON THE RECORD EXCEPT THE EXPLANATION GIVEN BY THE ASSESSEE, WHICH EXPLANATIO N HAD BEEN FOUND TO BE NOT SATISFACTORY, IT DID NOT FOLLOW THAT THE RECEIPT CONSTITUTED HIS TAXABLE INCOME AND THAT PENALTY SHOULD BE IMPOSED FOR CONCEALMENT OF INCOME. THE TRIBUNAL CANCELLED THE PENALTY. ON A REFERENCE : HELD, THAT THE TRIBUNAL HAD CONSIDERED THE MATTER IN THE LIGHT OF THE EXPLN. TO S.271(1)(C). THE INITIAL BURDEN OF PROOF W HICH LAY UPON THE ASSESSEE TO PROVE A NEGATIVE FACT COULD BE SAID TO HAVE BEEN DISCHARGED BY MERELY PLACING A PREPONDERANCE OF PROBABILITIES B Y THE ASSESSEE. THE FACTS RELATING TO THE EXPLANATION OFFERED BY THE ASSESSEE WITH REGARD TO THE CASH CREDITS IN QUESTION AND THE EVIDENC E ADDUCED IN THAT BEHALF WERE CONSIDERED BY THE TRIBUNAL. THE TRIBUNA L WAS RIGHT IN HOLDING THAT THE ONUS SHIFTED BACK TO THE REVENUE AND IT HAD NOT BEEN DISCHARGED. THE CANCELLATION OF PENALTY WAS, THEREFO RE, VALID. 19 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 27. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE LIGHT OF THE ABOVE DECISIONS, WE ARE OF THE CONSIDERED OPIN ION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I .T. ACT ON ACCOUNT OF ADDITION OF RS.88,79,614/- BEING ADDITION ON AC COUNT OF INTRODUCTION OF CAPITAL BY THE PARTNERS AND THE AMOUNT OF RS.31,99,448/- OUT OF THE SURRENDERED AMOUNT OF RS.50,00,00 0/- BEING EXPENDITURE ON ACCOUNT OF OFFICE FURNITURES, EXPENDITUR E ON ACCOUNT OF RESIDENTIAL HOUSE OF PARTNER AND EXPENDITURE ON ACCOUNT OF WITHDRAWAL. HOWEVER, IN OUR OPINION PENALTY ON ACCOUNT O F SURRENDER OF RS.18,00,487/- BEING EXCESS CASH FOUND DURING THE COURSE OF SURVEY IS LEVIABLE SINCE THE ASSESSEE COULD NEITH ER RECONCILE NOR EXPLAIN THE EXCESS CASH FOUND DURING THE C OURSE OF SURVEY. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORD ER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO LEVY PENALTY @10 0% ON TAX SOUGHT TO BE EVADED ON THE EXCESS CASH OF RS.18,00,487/- FOUND DURING THE COURSE OF SURVEY. THE ASSESSING OFFICER WILL REC OMPUTE THE PENALTY AS DIRECTED ABOVE. THE GROUNDS RAISED BY T HE REVENUE ARE ACCORDINGLY DISMISSED AND THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 28. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30-11-2016. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; DATED : 30 TH NOVEMBER, 2016. 20 ITA NO.1655/PN/2014 & CO NO.31/PN/2016 ( )'+ , / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // ' $ / TRUE COPY // // TRUE COPY // %& $ ) / SR. PRIVATE SECRETARY ), / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A ) - II, NASHIK 4. 5. THE CIT - II, NASHIK ' $$), ), A BENCH / DR, ITAT, A BENCH PUNE; 6. 1 / GUARD FILE.