ORDER
Phool Singh, J.M.
1. These two appeals, preferred by the assessee, were taken up together for hearing and are being disposed of by a common order for the sake of convenience.
2. ITA No. 5995/Del/1993 is against order dt. 3rd September, 1993 recorded by the CIT(A) by which penalty of Rs. 4,986 imposed by the Assessing Officer (“AO” in short) under s. 271(1)(a) of the IT Act, 1961 stands confirmed by the CIT(A). It will be noted that assessee was expected to file return for asst. yr. 1987-88 by 30th June, 1987. However, the return was filed on 30th March, 1988. As there was delay in filing the return, the AO initiated penalty proceedings under s. 271(1)(a) of the IT Act by serving a show-cause notice. It was submitted by the assessee that due to some mental tension the partner who was entrusted with the accounts could not finalise the same and Form No. 6 was also filed on 30th July, 1987, vide receipt No. 48 for extension of time. This reply of the assessee was considered by the AO who noted that assessee was supported to file return and when he failed, a notice under s. 139(2) was also issued to the assessee which was served on 9th September, 1987, but return which was to be filed in pursuance of this notice under s. 139(2) by 8th October, 1987 was actually filed on 30th March, 1988. The reason given by the assessee for delay was not found satisfactory and he imposed penalty of Rs. 4,986. The assessee came in appeal before the CIT(A) and same pleas were taken as agitated before the AO. However, the CIT(A) was also of the opinion that there was no evidence on record to prove that assessee had filed Form No. 6 as pleaded. Further, no evidence had come on record to show that there was dispute amongst the partners or the partner who was entrusted with accounts was having any type of mental tension. The CIT(A) noted that burden was on the assessee to show that existence of reasonable cause as held by Rajasthan High Court in the case of S. Zoraster & Co. (Supplies) (P) Ltd. vs. CIT (1993) 201 ITR 558 (Raj). According to learned CIT(A) the assessee failed to discharge the said burden and thus he confirmed the penalty levied by the AO against which assessee is in appeal.
3. The learned counsel for the assessee has pleaded the same facts as were taken before the AO as well as before the CIT(A). Nothing material has been filed before the Bench to show that assessee filed Form No. 6 nor any other material evidence regarding dispute amongst the partners or about mental tension of any partner has been filed. In the absence of this the AO was justified to conclude that assessee failed to file return in pursuance of notice under s. 139(2) without any reasonable cause and CIT(A) rightly confirmed his action. No basis for deletion of penalty and we uphold the finding of CIT(A). Accordingly, appeal is dismissed.
4. ITA No. 5996/Del/1993 is against order dt. 3rd August, 1993, by which CIT(A) confirmed the penalty of Rs. 43,824 under s. 271(1)(c) out of Rs. 50,000 levied by the AO.
5. Facts relevant to decide the appeal are that assessee filed return for asst. yr. 1987-88 at an income of Rs. 42,095.28 and assessment was completed at an income of Rs. 1,49,940 in which there were addition of Rs. 50,000 each on account of unexplained cash credit in the name of Dalip Kumar and Phool Chand respectively. It appears that CIT(A) confirmed the addition of Rs. 50,000 in the name of Dalip Kumar but restored the other addition of Rs. 50,000 to the file of AO with direction to provide an opportunity to the assessee to prove the genuineness of that transaction of cash credit of Rs. 50,000. It so happened that AO provided lot of opportunities to the assessee to produce Phool Chand so that his identity, capacity to pay the amount as well as genuineness of the transaction could be proved. However, the assessee failed to utilize those opportunity and ultimately moved an application surrendering the said amount with a condition that no penal action shall be taken. It appears from the record that AO made the addition of Rs. 50,000 and initiated proceedings for penalty under s. 271(1)(c) of the Act. In reply the assessee submitted that one of the cash creditors Shri Dalip Kumar was produced before the AO who had confirmed about giving of Rs. 50,000 to the assessee and he was having sufficient amount with him out of which he had given the said amount. The other creditor Phool Chand could not be produced as he was ailing and in the absence of his presence the assessee was forced to surrender the amount to avoid litigation and to buy peace of mind. In view of these facts it was pleaded that penalty in not leviable. The AO considered all the submissions. About Dalip Kumar the AO took into consideration the facts noted in the assessment records as well as order of CIT(A) in which Dalip Kumar was not found creditworthy of lending of Rs. 50,000 to the assessee. Further, about Phool Chand giving out the sequence of events leading to the surrender of an amount of Rs. 50,000 in the end by assessee and on the basis of these factual positions he concluded that assessee failed to prove source of the amount with Dalip Kumar and Phool Chand and treated that these depositors were merely name lenders to the assessee. He had levied a penalty of Rs. 50,000.
6. Before the CIT(A) the assessee pleaded the same facts also placed reliance on the decision of Hon’ble Supreme Court in the case of Sir Shadi Lal Sugar & General Mills Ltd. vs. CIT (1987) 168 ITR 705 (SC) on the point that there may be hundred reasons for making surrender but that fact alone will not be sufficient for levy of penalty as AO is supposed to bring some more material on record to levy the penalty. Other case law relied upon by the assessee was that of CIT vs. M. George & Bros. (1986) 160 ITR 511 (Ker) in which imposition of penalty under s. 271(1)(c) on basis of assessee’s surrender of amount and agreeing to addition was held as not well founded and Tribunal’s view was upheld in cancelling the penalty. Other view cited by assessee was in the case of CIT vs. Punjab Tyres (1986) 162 ITR 517 (MP) in which assessee agreed to addition on certain amount on account of unexplained investment to purchase peace with the Department and in the absence of any material evidence from the side of Department that assessee had consciously and deliberately concealed particulars of his income in regard to unexplained investment submission made by assessee was not found sufficient to warrant penalty of concealment of income under s. 271(1)(c). Other case laws were also referred. However, the CIT(A) after considering the factual position was of the opinion that judicial decisions referred to by the assessee were totally distinguishable on facts while in the case in hand the factum of concealment of income stands proved and he restricted the penalty to the minimum imposable at Rs. 43,824. Still feeling aggrieved the assessee came in appeal before the Tribunal.
7. The learned counsel for the assessee had reiterated the same submissions as were taken before the AO as well as the CIT(A). About Dalip Kumar it was submitted by the assessee that said creditor was examined and he had given out the source of his deposit of Rs. 50,000. In his statement he stated to have declared the amount under Amnesty Scheme and gave the amount to one Smt. Anubhi Aggrarwal and after taking that amount he had given that amount to the assessee. No doubt the assessee could not file the copy of return of Dalip Kumar in which he has declared the amount under Amnesty Scheme but Dalip Kumar had filed a certificate from Anubhi Aggarwal to whom he advanced the money in earlier years. Identity of Dalip Kumar as well his capacity and genuineness of the transaction were fully proved. If AO as well as the CIT(A) had not accepted that evidence, then there may be justification for addition but certainly it could not be the basis for levy of penalty in the absence of any proof that assessee willfully or due to fraud had concealed particulars of his income and money of Rs. 50,000 was as of assessee. About the cash deposit of Rs. 50,000 in the name of Phool Chand it was submitted by the learned counsel for the assessee that assessee had tried his best to produce the said Phool Chand before the AO but he failed as Phool Chand was ill and could not be produced and ultimately assessee was forced to surrender the amount but with condition that no penalty would be levied and in such circumstances the Department should have accepted the offer of the assessee in whole and if it was not acceptable as such, it should have rejected the said conditional offer and once they have acted upon that offer of the assessee then condition imposed by the assessee is to be given effect by the AO. In support reliance was placed on the decision of Hon’ble Bombay High Court in the case of Ramnath Jagannath vs. State of Maharashtra 57 STC 46. It was also submitted that there may be hundred reasons for making surrender and in the absence of any other material surrender alone will not be sufficient to warrant a penalty as laid down by Their Lordships in the case of Sir Shadi Lal Sugar & General Mills (P) Ltd. vs. CIT (supra) and other cases referred to before the AO as well as before the CIT(A). On the basis of these facts the contention was that no penalty is leviable.
8. The learned Departmental Representative had read over the order of the AO as well as relevant portion of the order of CIT(A) and submitted that in the case in hand there had been specific finding that Dalip Kumar was not in a position to lend the amount of Rs. 50,000 and Phool Chand could not be produced before the AO in spite of opportunity given by the CIT(A). The conclusions that identity of Phool Chand as well as his creditworthiness and genuineness of the transaction remained to be proved and that fact alone is sufficient to conclude that assessee committed default warranting penalty under s. 271(1)(c) of the Act.
9. We have considered the rival submissions and perused the record carefully. So far as cash credit in respect of Dalip Kumar is concerned admittedly Dalip Kumar had been produced before the AO and he had confirmed the transaction and also given out the source. It is another aspect that AO as well as the CIT(A) and even the Tribunal had not found the creditworthiness of said Dalip Kumar but fact remains that burden which was on the assessee stands discharged and that man was specific on the point that be had loaned Rs. 50,000 which he declared under Amnesty Scheme and even loaned the sum to Smt. Anubhi Agarwal and after realization of that he gave to the assessee. They were found not acceptable by authorities but fact remains that there may be a ground for making addition in the income of the assessee but that alone will not be enough for imposing penalty in the absence of any material brought out by the Department to prove that assessee had wilfully or due to fraud had concealed the income. No such finding has been recorded by the AO and thus penalty in respect of that amount is not leviable.
10. So far as cash credit to Phool Chand is concerned, assessee tried his best to produce him but due to his illness the assessee failed to bring him before the AO for cross-examination and ultimately forced to surrender in order to avoid litigation by itself. In doing so he had made conditional offer and once AO was not finding it easy to accept the offer then he should have rejected and made the addition on different counts but admittedly the addition had been made on the basis of surrender and that surrender was conditional one and thus that condition in the offer of assessee was impliedly accepted by the Department and in such circumstances the penalty cannot be imposed. Further, the Department has to bring something more in the case of such surrender as apex Court has concluded that surrender alone will not be sufficient for penalty as there may be hundred reasons for making surrender.
11. Before parting we may refer the decision of Addl. CIT vs. Rawalpindi Flour Mills (P) Ltd. (1980) 125 ITR 243 (All) in which addition on account of cash credits not proved to be genuine was not found sufficient for levy of penalty and in the same way in the case of CIT vs. Rudrappan & Co. (1984) 147 ITR 204 (Mad) if assessee failed to explain the source of cash credit, still penalty was not found leviable by the Hon’ble Madras High Court.
12. In view of these circumstances, we are of the considered opinion that penalty under s. 271(1)(c) is not leviable in the present case. Accordingly, penalty levied and confirmed by the authorities below under s. 271(1)(c) stands cancelled.
13. In the result ITA No. 5995/Del/1993 stands dismissed whereas ITA No. 5996/Del/1993 is allowed.