ORDER
Per Shri M. C. Agarwal, J. M. – These are cross-appeals by the assessed and the revenue respectively arising out of levy of penalty u/s 271(1) (c) of the Income-tax Act, 1961 for assessment year 1977-78.
2. The assessed is a HUF. Its previous year for asst. year 1977-78 ended on 31-10-76. On 20-8-76 a search took place at the premises in which Malti Prasad, his wife Smt. Janki Devi, their unmarried daughters Vibha, Abha and Sudha and their minor son Sudhir alias Munna resided. Malti Prasad happens to be the karta of the present assessed. The search was authorised against a partnership firm M/s Malti Prasad and S/Sh. Malti Prasad, Jagdish Prasad, Vijai Prasad and Ram Prasad. In the portion occupied by Malti Prasad and his cash amounting to Rs. 1,28,085.00 and some gold and silver ornaments were found and were found and were seized. At the time of search Malti Prasad was examined on 20-8-76. He stated that the cash belonged to his wife who after selling some ornaments about 30 years ago started money-lending business. He also stated that the ornaments belonged to his wife and daughters. Ultimately the Income-tax Officer made the following additions to the income of Malti Prasad HUF :
Rs.
Unexplained cash
1,13,085.00
Cost of unexplained silver
22,500.00
Cost of unexplained pawned ornaments
4,100.00
As is evident from the assessment order the assesseds stand about the cash was as under :
(i) Rs. 15,000
belonged to assesseds daughter Smt. Pushpa Mittal.
(ii) Rs. 9,000
was cash in hand of pawning business of Bhano Devi (mother of Smt. Janki Devi).
(iii) Rs. 8,085
was cash, being savings of Janki Devi, wife of assesseds karta Malti Prasad.
(iv) Rs. 96,000
belonged to Smt. Janki Devi and was offered for tax in her case.
(v) Rs. 1,758
Savings of Smt. Usha Rani wife of Ram Prasad.
Rs. 1,29,843
The Income-tax Officer treated the three sums at serial numbers (ii), (iii) and (iv) as having not been explained and treated their total Rs. 1,13,085 as the assesseds income.
3. In the search, silver ornaments valued at Rs. 48,380 was found in the premises occupied by Malti Prasad, his wife and children. After enquiry the ITO held that about half of the quantity of silver ornaments could belong to the ladies of the house and hence he added Rs. 22,500 as the value of silver ornaments remaining unexplained.
4. According to the ITO pawned ornaments worth Rs. 4,100 were also found but the assessed could not explain the source of acquisition thereof. This was also therefore treated as assesseds income. The seizure memo prepared at the time of search, however, does not mention any such item.
5. On appeal, the addition of Rs. 1,13,085 was sustained by the CIT (A). The addition on account of unexplained silver ornaments was also upheld but its extent was reduced by Rs. 2,000 on account of impurities in silver ornaments. The addition of Rs. 4,100 had been deleted by CIT (A) as in his directions u/s 144B the IAC and not approved of the addition. The assessed challenged the quantum assessment by a further appeal to this Tribunal in which no dispute was raised about the claim that Rs. 96,000 belonged to Smt. Janki Devi.
6. The ITO initiated penalty proceedings u/s 271(1) (c). The assessed denied that it concealed the particulars of its income or furnished inaccurate particulars. It was contended that the explanations offered were bona fide and had not been held to be false. Regarding the sum of Rs. 96,000 it was stated that the assessed had agreed to its inclusion for tax in the assesseds income for the purpose of buying peace and on the condition that no penalty would be imposed. These explanations did not find favor with the ITO who levied the maximum amount of penalty leviable i.e. Rs. 2,30,170 as against the maximum amount of Rs. 1,15,085.
7. On appeal the learned CIT (A) held that the assesseds explanation about the addition of Rs. 20,500 as the value of silver ornaments was bona fide and hence no penalty could be levied with regard to that addition. Regarding two sums of Rs. 9,000 and Rs. 8,085 also the learned CIT (A) held that the assesseds explanation was probable and hence, no penalty can be levied with regard to those amounts as well. According to the learned CIT (A) therefore, penalty could be levied only for the addition to the extent of Rs. 96,000. He found that in view of the co- operation extended by the assessed only the minimum of the penalty leviable should be imposed. It is against this order that the assessed and the revenue are in appeal before us.
8. We have heard the learned counsel for the assessed and the learned Departmental Representative and have perused the material placed before us.
9. At the hearing the learned counsel for the assessed moved an application for admission of an affidavit sworn by Malti Prasad, the assesseds karta to state that he had surrendered Rs. 96,000 for assessment in the hands of the HUF on an understanding given by the IAC in proceedings u/s 144B that no penalty would be levied. No such assertion appears to have been made before the authorities below. In its reply dated 23rd December, 1982 filed in the penalty proceedings the assessed had stated “the only other items which has been added as income in my case is Rs. 96,000. This amount was in fact the property of my wife Smt. Janki Devi and was also shown in the return of income filed by her. However, during the course of hearing u/s 144B before the IAC, Moradabad the petitioner had agreed that it should be assessed in his case. This agreement was subject to the specific condition that no penalty was to be levied in this respect”. In these averments there is no mention that the IAC (A) gave any understanding to the assessed that no penalty will be levied. No reason is given why such stand was not taken before the authorities below and why the affidavit was filed there. We are of the opinion that this new contention and additional evidence cannot be allowed to be put in at this late stage and we accordingly reject the application for the admission of the affidavit.
10. On merits the learned counsel for the assessed contended that no penalty could be levied on the assessed as it was not shown that the assessed concealed the particulars of its income or furnished inaccurate particulars of the same. The learned counsel for the assessed explained that the only basis on which the sum of Rs. 96,000 was taxed as assesseds income was the surrender of this amount by the assesseds karta without any admission that the amount represented HUFs income and particularly with a clear denial of its connection with the HUF. According to the learned counsel in the absence of any evidence to connect this amount with the HUF, no penalty could be levied. The same, according to the learned counsel, was the case with regard to the addition of other amounts in respect of the cash and ornaments. Reliance was placed on CIT v. Mansa Ram & Sons [1977] 106 ITR 307 (All.) in which the assessed had surrendered certain amounts admitting them to be his income with the clarification “As desired, provided no penalty was imposed”. The Honorable High Court observed that it was clear from the letter that some sort of assurance was given by the ITO to the assessed that if the amount was offered for assessment, no penalty would be levied. It was upon those conditions that the Tribunal held that the charge of concealment was not proved and the Honorable High Court held that the Tribunal was justified in doing so. Reliance was also placed on another judgment of the Allahabad High Court in Addl. CIT v. Krishan Singh [1977] 106 ITR 534, in which it was held that the petitioners agreement to be assessed at a higher flat rate did not amount of a confession of concealment and that the department had failed to prove that the amount treated by the ITO was in fact the assesseds concealed income.
11. The learned Departmental Representative, on the other hand, contended that the charge of concealment was sufficiently made out against the assessed and in any case in view of the Explanation I to section 271(1), there was presumption of concealment which the assessed had failed to rebut. The learned Departmental Representative also relied upon a Full Bench judgment of Honorable the Patna High Court in CIT v. Nathulal Agarwala & Sons [1985] 153 ITR 292, in which it has been held that in view of Explanation to section 271(1) (c) there was no burden on the revenue to prove that the difference between the returned income and the assessed income was the undisclosed income of the assessed but the burden lay on the assessed to prove that there was no concealment.
12. We have given our careful consideration to the respective argument and the material placed before us. Admittedly the assessed right from the beginning has been contending that the amount found in cash or the gold and silver ornaments did not belong to it but to various members of the family. Rs. 15,000 was said to belong to Smt. Pushpa, Rs. 8,085 and Rs. 96,000 were said to belong to Smt. Janki Devi, wife of the assesseds karta. With regard to the sum of Rs. 96,000 originally the Malti Prasad had stated that the amount represented accumulations from a money-lending business. Smt. Janki Devi was produced as a witness during the assessment proceedings and she stated that the sum of Rs. 96,000 belonged to her. About the source she stated that she had gone on a pilgrimage to Haridwar where she found a bag containing Rs. 96,000 in cash. This explanation of her has been contested by the learned Departmental Representative contending that it was too fanciful to be accepted.
13. The assessed is an inanimate body that is an artificial person which cannot possess anything physically. Various articles were found in a house in which various persons mentioned above constituting this family were living. The seizure memo shows that the entire cash and ornaments found in the house were taken into custody by the revenue and although in the normal course of things, different articles and different sum should belong to various persons occupying the house the authorities entrusted with the job of the search did not note the circumstances concerning each find so that the search memo cannot help in finding out to whom the various articles and cash belonged. The assesseds explanation as already stated has been that the amounts or the articles did not belong to it but belonged to the individual members of the family. From the record we find that there was no evidence or record to show that the various things belonged to the Hindu Undivided Family and the ITO assessed their respective values in the assessment of the assessed on the presumption that they were recovered from the possession of the HUF. The following are the observations of the learned ITO made in the assessment order :
“During the course of search operation at the residential premises of the assessed, apart the gold ornaments undermentioned assets were found :
Cash Rs. 1,28,085
Gold ornaments Rs. 2,90,300 344 tolas
Silver ornaments Rs. 48,380 3756 tolas
The assessed was given an opportunity to prove the acquisition of the assets found at the time of search. I am discussing the assesseds explanation regarding the acquisition of the assets as under :
Cash Rs. 1,28,085
It has been stated that Rs. 15,000 belongs to Smt Pushpa Mittal, daughter of the assessed; Rs. 9,000 in cash in hand in pawning business of Smt. Bhano Devi; Rs. 8,085 savings of Smt. Janki Devi wife of the assessed and Rs. 96,000 have been offered for taxation in the case of Smt. Janki Devi and Rs. 1758 represents the savings of Smt. Usha Rani w/o Shri Ram Prasad. The assessed has filed affidavits of Smt. Janki Devi. The assessed was required vide this office letter dated 1-2-1980 to prove the contention that Rs. 9000 belonged to Smt. Bhano Devi and Rs. 8085 represents the savings of Smt. Janki Devi and why the sum of Rs. 96,000 which has been surrendered in the case of Smt. Janki Devi should not be considered in the hands of the assessed. The assessed has filed a reply vide letter dated 20-2-1980 and produced Smt. Pushpa Mittal and Smt. Janki Devi for examination. The contention of the assessed cannot be accepted in view of the undermentioned discussions :
(i) Rs. 9000 alleged to be belonging to the money-lending business of Smt. Bhanu Devi. This aspect has already been considered in the case of the case if the firm M/s Malti Prasad Ram Prasad and hence here too the explanation cannot be accepted. It has further been mentioned that Smt. Bhanu Devi had given to Smt. Janki Devi 100 tolas of gold at the time when her husband was declared insolvent. Reliance has been placed on the copy of the will. It is further stated that this amount has been invested in the pawning business and this sum is explained as out of the money having been remained in cash over and above the pawned articles. The pawned articles were fount at the business premises of the firm M/s Malti Prassad and Ram Prasad and the matter has been discussed in that case. There is no evidence to prove that the money even it received was invested in pawning business or any pawning business was carried on and this money was not of that. It is evident from the will also that Smt. Janki Devi was to look after the family of her parents and necessarily the expenditure must have been incurred thereon also. In view of above mentioned discussion and also for the reasons discussed in the case of Malti Prasad Ram Prasad I hold that this sum of Rs. 9000 remains unexplained.
(ii) As regards the savings of Rs. 8085 no definite evidence has been filed. It has only been asserted by Smt. Janki Devi that money belongs to her. Since no evidence has been filed to prove the nature and source of Rs. 8085 I hold that the same also remains unexplained.
(iii) As regards Rs. 96,000 Smt. Janki Devi was examined and she has given a very interesting story regarding the acquisition of a sum of Rs. 96,000. It has been stated that she had gone to Haridwar with her grand daughter. There her grand daughter brought a bag which was laying near Ganga and gave to Smt. Janki Devi. This bag was opened and it contained currency notes of Rs. 96,000. Here too the money was alleged to have been found in the month of June 1976 i.e. before the date of search. All the ladies in their statements have stated that whatever they have received they have received in June 1976. When questioned why the matter was not reported to Police and why the real owner of it was not found out it has been stated that due to fear the bag was not opened at Haridwar and it was opened at Dhampur. The story that she received a bag containing Rs. 96,000 cannot be believed. Further the story that the bag was not opened at Haridwar cannot also be believed. It may also be mentioned that no police report has been lodged. Smt. Janki Devi did not have any separate source of income and as such I hold that the money belongs to the assessed from whose residential premises the money was found. It may also be mentioned that the act of surrendering Rs. 96,000 in the hands of Smt. Janki Devi shows that the assessed has no explanation to offer regarding the source of acquisition of Rs. 96,000. It may also be mentioned that there is no evidence to show that a sum of Rs. 96,000 was an earning of Smt. Janki Devi Smt. Janki Devi is also a member of the assessed family. Before the learned IAC the assessed has showed inclination that the amount may be added in the assessment of the family and gave in writing in his letter dated 5-9-1980 before him as under :
There is nothing to prove that the amount in question belongs to the assessed but in order to purchase peace and get the matter solved the assessed is agreeable to the addition of the above amount in his own assessment on the understanding that no penalty will be imposed on the assessed.
The above sum was recovered from the assessed family and there was no evidence that this was an individual income of Smt. Janki Devi. There is also no satisfactory explanation to explain the same. In these circumstances the amount is being assessed as income of the assessed family and no understanding about imposition of penalty could be given to the assessed.”
The ITOs presumption that the various assets were recovered from the assessed family has no basis whatsoever. The search was directed against individuals and not against any fictional identity like a HUF. Further there is nothing in the seizure memos to show that it was the HUF that was in possession of the various articles. Malti Prasad was examined on 20-8-1976 itself and he did state that the house belonged to the HUF but simultaneously he ascribed the ownership of various articles to various persons i.e. his wife and daughters etc. It is inconceivable that any property found in a house in which members of a family live jointly can automatically be said to belong to the family. That has to be proved by positive evidence by any person who wants to contend so. And apart from the fact that the various things were found in the house occupied by members of this family, there was no circumstance to connect the family as a unit with those properties. On the other hand, there was the sworn statement of Malti Prasad, who stated that the properties belonged to certain individual members of the family which in other words meant that the same did not belong to the HUF. There was also the statement of Smt. Janki Devi, who had acknowledged the ownership of two sums of money i.e. Rs. 96,000 and Rs. 8,085. Her explanation about the source of Rs. 96,000 has not been accepted and rightly so but the assesseds explanation that the amount did not belong to it (the HUF) has nowhere been found to be false or lacking in bona fides. Further in the absence of any positive evidence that the moneys and properties in question actually belonged to the assessed-HUF, the statements of Janki Devi and Malti Prasad were sufficient to discharge the onus that lay on the assessed and to shift the burden on the revenue to prove that the cash and ornaments actually belonged to the assessed-HUF.
14. As regards the other sums of Rs. 8085 and Rs. 9000 the learned CIT (A) has observed as under :
“The other two amounts i.e. Rs. 8085 and Rs. 9000 have been constantly explained as belonging to Smt. Janki Devi. As is evident from the record and as has been mentioned by the IAC in his directions u/s 144B also Smt. Janki Devi had made a disclosure of Rs. 50,000 in December 1975 under the Voluntary Disclosure Scheme. 1975. This disclosure itself indicates that she had some sources of income out of which she was making some money. The explanation given by the assessed was not initially accepted by the IAC u/s 144B and later on by the ITO in the proceedings u/s 271(1) (c) on the ground that having made the disclosure in December, 1975 the lady could not have earned any further amount between December, 1975 and August, 1975. While assessing the evidence under the Explanation to section 271(1) (c), the explanation has to be judged on the standard of probability and it could not be considered that it was absolutely improbable for the assessed to have this additional money after the disclosure was made in December, 1975. Since the explanation furnished by the assessed is substantiated with the help of disclosure made in December 1975 establishing certain sources of income with her, these two amounts would be considered as explained in terms of Explanation to section 271(1) (c).”
Smt. Janki Devi was married in a well-to-do family and also appears to come from an affluent family. She had made a disclosure of Rs. 50,000 much before the search in question and the learned Departmental Representative could not show to us why it was not probable for her to possess the amounts. Regarding silver ornaments, a portion thereof was accepted by the ITO himself to belong to the ladies of the house. Though some addition in respect thereof has been sustained, the fact remains that the ornaments were meant for ladies. It would be natural to presume that the entire quantity of ornaments belonged to the ladies of the house hold in their individual capacities. Every lady in a Hindu household is possessed of some Stridhan and there has to be some evidence to hold that the properties in spite of belonging to the ladies belonged to the HUF as a unit. There was complete lack of such evidence on the point.
15. Having considered the entire material on record we are of the opinion that in spite of the fact that the various additions had been made to the assesseds income in the quantum assessment it was not a fit case in which penalty could be levied on the assessed because there was no sufficient evidence to show that the assets referred to above belonged to the assessed-HUF and the assesseds explanation that the various items belonged to the individual members of the HUF had neither been found to be false nor unsubstantiated. The mere fact that those explanations were not accepted in the quantum proceedings would not automatically authorise the levy of penalty. We are, therefore, of the view that no penalty is leviable in the present case. The assesseds appeal therefore, deserves to be allowed while that of the department deserves to be dismissed. Accordingly we allow the assesseds appeal and cancel the penalty levied on the assessed. The revenues appeal is dismissed.
As per Accountant Member – The short point for decision in this appeal is whether the assessed-HUF is liable to penalty for concealment of income in respect of asst. year 1977-78 in terms of section 27(1) (c) of the Income-tax Act, 1961 as it stood at the relevant time, when the return in question was filed by the assessed family on 11-7-1977, declaring an income of Rs. 35,469 only from the share of the family in the business of the firm know as Malti Prasad Ram Prasad. The finally assessed income in respect of the aforesaid assessment year is Rs. 2,13,928.
2. The family consisted of, during the accounting period under consideration, which ended on Diwali, 1976, Shri Malti Prasad, the karta of the family, his wife Smt. Janki Devi, and his three unmarried daughters named Vibha, Abha and Sudha. Prior to Diwali, 1965, the above family included four sons of Malti Prasad also. In 1965, the sons separated from Shri Malti Prasad. Three of the sons have since been married and have families. Their names are Jagdish Prasad, Ram Prasad and Vijay Prasad. One son, Shri Sudhir Kumar, is minor and unmarried and lives with his father Shri Malti Prasad. All the aforesaid members of the family, namely, the three married sons who have already been separated, and the fourth son, along with the wife and unmarried daughters of the assessed live in one two-storeyed house in Dhampur. The first storey is in the occupation of the three separated sons; the lower portion, i.e. the ground floor, is in the occupation and possession of Shri Malti Prasad, who lives therein with his wife, three unmarried daughters and the minor son. In the said ground floor, there is a common strong room, wherein the various family members are alleged to be keeping their precious possessions, like ornaments, cash etc.
3. On 20th August, 1976, the aforesaid residential premises, as also the business premises of the firm Malti Prasad Ram Prasad and Malti Prasad Jagdish Prasad, in which the assessed and his sons are partners were searched by the Income-tax department under section 132 of the Income-tax Act, 1961. The search warrants were in the names of the firms and the partners of the said firm. The assessed, namely, Shri Malti Prasad was a partner in M/s Malti Prasad Ram Prasad in his capacity as karta of the HUF. The residence of Shri Malti Prasad being the residence of the family, which he was representing in the firm was searched by the Income-tax authorities. It is, therefore, in my opinion, not correct to say that Shri Malti Prasad was searched in his individual capacity. He was searched in his capacity as karta of his family which was represented in the firm through him. Even the inventory of articles seized from his premises, being annexure A, which has been placed on record, goes to show that the seizures were “in the portion occupied by late Multi Prasad, his wife Smt. Janki Devi and his unmarried daughters Vibha, Abha and Sudha and minor son Sudhir urf munna”. The premises searched were admittedly of the HUF and, therefore, according to me, what was searched was the residential premises of the HUF, who is the assessed. There is nothing on record to show that Shri Malti Prasad is an assessed in his individual capacity also. In any case, no search took place in his individual residence if there was any. In fact it did not exist. From the portion occupied by the members of the assessed family, the following cash and ornaments were recovered as per annexure A to the Punchnama :
Rs.
1. Cash
1,28,500
2. Gold ornaments valued
2,06,500
3. Silver ornaments valued
48,380
Apart from the above seizures, there were other seizures also from the residential premises of the married sons living upstairs and from the business premises of the firm. Separate annexures were made out with regard to these seizures being annexures B to H and X to Punchnama. Some cash was recovered from the residential premises of the partners Shri Jagdish Prasad, Vijay Prasad and Ram Prasad. The details of the said seizures have been given in the order under section 132(5) at page 5, Item No. IV. In her affidavit, Smt. Usha Rani wife of Ram Prasad had deposed that Rs. 1,758 shown in annexure D were found in cash in her personal room, and that the same represented her personal savings made in past from the cash amounts which she used to received from her husband for meeting domestic expenses. The Punchnama has clearly indicated the places of recovery of the various items and it will, in my opinion, be incorrect to infer that all that was recovered from the searched premises was all jumped up without any means to know what was recovered from where.
4. With regard to seizures made from the residential premises of the assessed family as per annexure A to the Punchnama, statement of the karta of the family, Shri Malti Prasad was recorded on the date of the search itself, i.e., on 20-8-1976 in terms of section 132(4) of the Income-tax Act, 1961. With regard to the source of the aforesaid discovered cash, gold and silver ornaments the statement of the said Shri Malti Prasad was, inter alia, to the following effect :
“Free English translation from Hindi to English :
I live in the ground floor of this house, the entire ground floor is in my possession. I, my wife Janki Bai, my three daughters, Prabha, Vibha and Sudha and my youngest son Sudhir live in it. On the first floor live my three sons, Jagdish Prasad, Vijay Prasad and Ram Prasad with their respective families. The cash; ornaments and documents which have been found on the ground floor belong to my wife Smt. Janki Bai. They are her individual property. Her father Rai Sabib Seth, Ram Kishan belonged to Mahu Camp, Indore. He declare himself Insolvent to the extent of Rs. 7,00,000 in 1965 and had (prior to it) sent all his wealth to my place to his daughter. My wife is his eldest daughter. There is no documentary evidence in support of the above, nor there is any account of this cash and ornaments. My wife and given at the time of her marriage ornaments weighing 120 tolas by my father and 100 tolas by my mother-in-law. They gave about 100 tolas of gold ornaments at the time of the birth of our 10 children from time to time. The rest of the ornaments belong to my sisters-in-law; Smt. Sushila Devi, Smt. Vidya Wati, Smt. Uma, Prem and Geeta. The ornaments belonging to my elder daughters Smt. Santosh Kumari and Smt. Pushpa Kumari are also here.”
On being asked as to whose was the cash recovered from his premises, he stated :
“It belongs to my wife Janki Devi. I had sold some ornaments out of the above in 1946. The sales proceeds were lent on interest. The same money has gradually grown over 30 years into the present amount…”
On being asked if tax was paid since 1946, on the above growth of the funds due to money-lending, Shri Malti Prasad replied :
“No tax was paid on it as it was Shri Dhan of Smt. Janki Bai. I had no knowledge of it.”
5. In course of time proceedings under section 132(5) were initiated in the case of the assessed family. In the course of the said proceedings certain affidavits were filed by some of the members of the assessed family. Two of the affidavits have been placed on record by the assessed in these proceedings, namely, those of Asha Rani W/o Shri Jagdish Prasad and Smt. Usha Rani wife of Shri Ram Prasad. Statement of Smt. Usha Rani recorded by the ITO on 7-3-1980 has also been placed on record. In these statements the common refrain of the two deponents has been that they had kept some of their ornaments in the common strong room of all family members in the ground floor and that some of the ornaments seized from the said common strong rood belonged to them. The said affidavits were, however, not accepted by the ITO in the proceedings under section 132(5) on the ground that there was no independent corroborative evidence to support the above affidavits.
6. When the matter reached the assessment stage, the explanation with regard to the aforesaid cash and ornaments, which was given by the karta of the assessed family, Shri Malti Prasad under section 132(4) on 20-8-1976, was altogether abandoned with regard to the source of the acquisition. The new explanation given before the ITO by the assessed family was that the cash of Rs. 1,28,085 which was recovered from the assessed family premises (presumably the strong room), belong to the fallowing persons :
1. Rs. 15,000 belong to the assesseds married daughter Smt. Pushpa Lata Mittal.
2. Rs. 9,000 belong to the pawning business carried on by the mother-in- law of Shri Malti Prasad Smt. Bhano Devi.
3. Rs. 8,085 belong to Smt. Janki Devi, being her savings.
4. Rs. 96,000 belong to Smt. Janki Devi in respect of which she had filed a separate return after the aforesaid search had taken place at the residential premises of the assessed.
In respect of the source of Rs. 96,000, Smt. Janki Bai was examined by the ITO on 19-3-1980. Her statement was, inter alia, as follows :
“When I had gone to Haridwar, there at Har Ki Pauri, my younger daughter found a bag. When we returned home and opened the bag, there were currency notes in it.”
On being asked as to when this event had taken place, Smt. Janki Bai said that it happened in June, 1976. On being further asked if she had reported the matter to the Police, she said that she had not done so. She submitted that she had not opened the bag at Haridwar as she was afraid and that the bag was opened only on reaching home and that she kept the money with her and was thinking of declaring it to the Settlement Commission. The explanation of the assessed was not accepted by the ITO, who accordingly framed a draft assessment order under section 44B (1) proposing to add not only the cash recovered but also the ornaments recovered from the residential premises and referred the matter to the IAC under section 144B, as the proposed additions were opposed by the assessed.
7.1 The IAC, after considering the submission made before him, accepted the assesseds plea regarding gold ornaments. According to him, taking into account the evidence led by the assessed, the possession of the gold ornaments by the wife of the karta Smt. Janki Bai and the wives of the married sons and the married daughter Smt. Pushpa, to the extent of the recovery of the gold ornaments, was proved. Hence no addition on this account was justified.
7.2 Regarding cash recovery, he again accepted the evidence of Smt. Pushpa Mittal, the married daughter of the assessed Shri Malti Prasad, that she had given Rs. 15,000 to her mother Smt. Janki Bai. The remaining explanation, namely, to the extent of Rs. 1,13,085 was not accepted by the IAC. His observations with regard to the various sums explained by the assessed in his explanation were, inter alia, as below :
“It is stated that a sum of Rs. 96,000 has been surrendered being assessed as income of Smt. Janki Bai, wife of Shri Malti Prasad and of the balance amount…. Rs. 9,000 (belong) to Smt. Bhano Devi mother of Smt. Janki Bai and the remaining sum of Rs. 8,085 represented saving of Smt. Janki Bai. The entire sum of Rs. 1,28,085 was undoubtedly recovered from the strong room belonging to the family of the assessed. There is no evidence to show that the sum of Rs. 96,000 was the individual earning of Smt. Janki Bai. Smt. Janki Bai is also a member of the family. Ultimately the assessed showed his inclination to agree with the amount may be added in the assessment of the family and gave it in writing in his letter dated 5-9-1980 before me as under :
There is nothing to prove that the amount in question belongs to the assessed but in order to purchase peace and get matters sort, the assessed is agreeable to the addition of the above amount in his own assessment on the understanding that no penalty will be imposed on the assessed.
The sum was recovered from the assessed family; there is no evidence that this was the individual income of Smt. Janki Bai. There was also no satisfactory explanation to explain the sum. In these circumstances, this amount has got to be assessed as income of the assessed family and no understanding about the imposition of penalty could be given to the assessed.
Another sum of Rs. 9,000 is stated to belong to Smt. Bhano Devi, the mother of Smt. Janki Bai. It was explained that Smt. Bhano had given to Smt. Janki Bai 100 tolas of gold and Rs. 20,000 at the time when her husband was declared insolvent (in 1965). Reliance is placed on the copy of the will. The amount was stated to have been invested in pawning business and this sum is explained as out of money having been remained in cash over and above the pawned articles. The pawned articles were found at the business premises to the firm M/s Malti Prasad Ram Prasad and the matter has been discussed in that case. There is no evidence to prove that the money even if received was invested was invested in pawning business or any pawning business was carried on and this money was out of that. It is evident from the will also that Smt. Janki Bai was to look after the family of her parents and necessarily the expenditure must have been incurred thereon also. In any case, the amount has not been satisfactorily explained and has, therefore, to be treated as income of the family from undisclosed sources.”
The balance sum of Rs. 8,085 is stated to be the saving of Smt. Janki Bai. Here also no satisfactory explanation is forth coming. I find that Smt. Janki Bai had made a disclosure of Rs. 50,000 only in December 1975 and had deposited the amount after making payment of the tax and deposited in bank. There in nothing to show if this lady could have saved this sum of Rs. 8,085 after Dec. 75 and before Aug. 76. The sum remains unproved and is to be taken as income from undisclosed sources.
7.3 Regarding silver ornaments, the IAC accepted the explanation of the assessed that some part of the find belonged to the ladies of the family. The value of the remaining find, being Rs. 22,500, was directed by him to be added to the assessed familys total income.
8. The ITO, in course of time, completed the assessment of the HUF on the basis of the above directions of the IAC. He simultaneously issued notice under section 271(1) (c) to the assessed requiring the family to show cause as to why penalty be not imposed on it for concealment of income.
9.1 The assessed carried the matter in appeal to the CIT (A) and challenged before him all the aforesaid additions including that of Rs. 96,000. The learned CIT (A), after detailed examination of the evidence of the assessed, confirmed the additions regarding cash and silver ornaments referred to above. Regarding the sum of Rs. 96,000, the learned CIT (A) observed as below :
“1.6 The Income-tax Officer has further mentioned that at the time of search, Shri Malti Prasad partner, was examined on oath. He stated that the cash belonged to Smt. Janki Devi and had been acquired as a result of the sale of some jewellery in the year 1946. The sale proceeds of the jewellery are stated to have been invested in money-landing business. The principal along with interest was alleged to have aggregated to the amount of cash found at the residence of the family at the time of search. There are, thus, two contradictory explanations for the cash found at the time of search and none of them can be believed.
1.7 Since the contention that Smt. Janki Devi was carrying on any business had been disbelieved, the only conclusion that can be drawn is that the entire cash belongs to the appellant HUF and the taxation of the above mentioned sum in the hands of the HUF, is justified although a part of it has been surrendered in the case of Smt. Janki Devi. In this connection reference has to be made to the case of Lallu Mal v. CIT [1980] 126 ITR 42 (All.) In this case, there were deposits in a bank in the names of the wife and minor son of the assessed. The wife and the minor son had no independent means. The Court held that there was ample evidence on record to sustain the finding of the Tribunal that the deposits in dispute in the names of the wife and son were really the income of the assessed. The facts are not different here and the ratio of the ruling of the Honorable Allahabad High Court would apply equally to the present case. The addition made by the ITO is, therefore, sustained.”
9.2 The finding of the ITO regarding Rs. 8,085 and Rs. 9,000 were also confirmed by the learned CIT (A). He rejected the assesseds claim before him that he had surrendered Rs. 96,000 to be assessed in the familys hands to buy peace and on condition that no penalty shall be imposed. He pointed out in this regard the observation of the IAC in his order, wherein it was pointed out by the IAC that he could not accept the offer of the assessed and could give no undertaking that penalty shall not be imposed on the assessed for the addition of Rs. 96,000 in the hands of the assessed.
9.3 The addition on account of silver ornaments was also confirmed by the learned CIT (A), who observed that “after considering the evidence on record and the stand taken by the appellant from time to time, it is held that the ITOs action in considering only half of the seized jewellery as unexplained was quite reasonable….”
10. Against the aforesaid order of the CIT (A), the assessed preferred an appeal to the Tribunal, wherein significantly it did not contest the addition of Rs. 96,000 made to the assesseds total income by the ITO and sustained by the learned CIT (A), even though notice under section 271(1) (c) for concealment had already been issued by the ITO and the IAC (Asst.) had made it clear in his order that he had given no undertaking to the assessed that no penalty shall be imposed on the assessed for concealment of income, if it agreed to the addition of Rs. 96,000 to its total income, instead of treating it as the income of the wife Smt. Janki Bai. The addition in question was contested by the assessed before the CIT (A), as noted above, and the CIT (A) confirmed the addition of Rs. 96,000. Despite it, the assessed chose not to contest the addition of Rs. 96,000 in appeal before the Tribunal. It, however, contested the additions of Rs. 8,085 and Rs. 9,000 and that of the value of the silver jewellery in its hands. The Tribunal noted the grounds of appeal, which were raised before it by the family, in the following terms :
“1. (a) That there was no justification with the authorities to disbelieve the appellants version in respect of cash amounting to Rs. 9,000 and Rs. 8,085 found in the common strong room.
(b) That the sum of Rs. 9,000 was the cash in hand in pawning business carried on by the assesseds wife as trustee of Smt. Bhano Devi under Will which was duly proved.
(c) That the learned CIT (Appeals) was not right in maintaining the addition of Rs. 20,500 for the value of the unexplained silver ornaments. The appellants statement that they belong to ladies of the family and were acquired by them at the time of their marriages and were converted into new ornaments for making them saleable, has been wrongly disbelieved.
2. That there was no justification for not believing the appellants version that the sum of Rs. 8,085 was from the saving of his wife Smt. Janki Devi.”
11. The Tribunal rejected the assesseds appeal and confirmed the additions in question by observing, inter alia, as follows :
“The assessed is in appeal and on this issue also we have heard the learned authorised representative of the assessed and the Department. We have also perused the reasoning of the lower authorities and the paper book since placed on our file for and on behalf of the assessed. In the absence of any evidence to the effect and in the face of the statement of Shri Malti Prasad recorded by the Revenue at the time of the search and seizure operation which statement was recorded on oath, this addition of Rs. 20,500 is justified on facts.
16. So is the case with the addition of Rs. 9,000 and Rs. 8,085 since there is no evidence for the assessed to corroborate his stand; more so, in the face of the fact that out of a cash of Rs. 1,13,085 treated as income of the assessed from undisclosed sources in lieu of unexplained cash found at the residential premises of the assessed, Rs. 96,000 has been surrendered though in the hands of Smt. Janki Devi, which was assessed in the hands of the assessed.”
12. Before inferences are drawn from the facts stated as above, about the culpability or otherwise of the assessed to the default of concealment, it will be necessary to recall some more facts pertaining to the asst. of the firm Malti Prasad Ram Prasad, from which the assessed family derives its share income. As noted earlier, a search was carried out at the business premises of the said firm also, and considerable quantity of pawned ornaments were recovered from there. They were not found recorded in the books of the assessed firm and Shri Ram Prasad, one of the partners of the firm, who was present at the spot at the time of the search, stated on oath that the transactions regarding the aforesaid ornaments were not noted in the books of account. He had further submitted that the firm was proposing to approach the Settlement Commission/CIT Lucknow for settlement with regard to the same. During the course of asst. proceedings, however, a new story was set up with regard to a part of the recovery and it was pleaded by the assessed firm before the ITO that amount invested in pawning business to the extent of Rs. 60,100 was in fact the property of Smt. Janki Bai, wife of Shri Malti Prasad, which was carrying on the business of pawning as a trustee for her mother and her sisters and that Smt. Janki Bai was given Rs. 20,000 in cash and jewellery weighing 100 tolas in 1963 by her father and mother with the direction to Smt. Janki Bai and Sh. Malti Prasad that Rs. 20,000 may be invested in pawning business and that interest received from it should be remitted to her and after her and her husbands death, the amount should be distributed amongst her six daughters including the wife of Sh. Malti Prasad. It was stated that the pawning business was, thus, started by Smt. Janki Devi in 1963 and, in course of time, the amount rose before the date of search and seizure to Rs. 69,100 out of which Rs. 60,100 was invested in the pawning business, and Rs. 9,000 was kept at her residence which was part of Rs. 12,808 recovered from the rent. There was an attempt of theft at the residence of Sh. Malti Prasad few days from the date of search and, therefore, the pawned ornaments were transferred to the shop for safe custody, and that there was a will dated 15-2-1963, written by Smt. Bhano Devi, mother-in-law of the karta of the assessed family, and from that will, it would be clear that the aforesaid statement of the assessed was correct. The theory of will was put to test by the ITO by summoning Smt. Vidyawati sister of Smt. Janki Devi, who was supposed to be in the know of the will, as per the statement of Smt. Janki Devi and Sh. Malti Prasad. Though direct question with regard to the existence of the will was put to her several times by the ITO in the presence of the assesseds counsel, yet Smt. Vidya Devi did not confirm the execution of the will or its existence. She, of course stated that her mother had told her that she had given Rs. 20,000 cash and gold weighing 100 tolas to Smt. Janki Bai with the instructions that the amount should be invested in money-lending business, but when questioned as to what were the items of jewellery given to Smt. Janki Bai, she said that she did not remember the same. When Shri P. C. Mathur, the assesseds representative, asked the lady whether she had any knowledge that any will was written, she replied No and then added, she had not received anything in writing. When further pointed question was asked whether any will was written, she replied that her mother gave jewellery to her six sisters. Thus, all attempts to get the theory of will corroborated by the evidence of Smt. Vidya Devi was put to not by her clearly avoiding the issue and not confirming the existence of the will.
13. In support of the theory of will, an affidavit of Smt. Sushila Devi, sister of Smt. Janki Devi, was also filed, but, when she was required to be presented for cross-examination on the basis of the said affidavit, she was not produced. The theory of will was, therefore, discarded by the ITO. Taking into account the overall circumstances and the statement of one of the partners of Shri Ram Prasad, the ITO drew the inference, with the approval of the IAC, that Smt. Janki Devi carried out no business as a trustee or otherwise in pawning as alleged. A corresponding addition of Rs. 54,100 was thus made to the firm. The said assessment of the firm was challenged in appeal before the CIT (A). The addition on account of the aforesaid sum of Rs. 54,100 was confirmed by the learned CIT (A) vide paragraph 1.9 of his order.
14. The firm challenged the aforesaid addition of Rs. 54,100 by filing an appeal before the Tribunal. The observations of the Tribunal on this point may be noted as below :
“7. We have heard the learned authorised representative of the parties at length. We have also perused carefully the orders of the lower authorities as also the material placed before us and are of the opinion that the reasoning of the lower authorities is based on cogent evidence and no interference on the above issue in the impugned order is called for. We find ourselves in complete agreement with the reasoning and conclusions arrived at by the lower authorities. At the time of search, Sh. Malti Prasad the partner of the assessed firm, has not mentioned this aspect of the Smt. Janki Devi carrying on the business of pawning either on her own behalf or on behalf of her mother. In fact, Sh. Malti Prasad, has in a subtle way hinted that the said pawning business belonged to the assessed firm and they were thinking of going before the Settlement Commission. That apart, there is no evidence to prove that Smt. Janki Devi received Rs. 20,000 from her parents and further that she was carrying on any business of pawning for and on behalf of her parents and yet further that the said amount smelled to the present figure since to books of account are produced and no evidence is there to warrant the inference that Smt. Janki Devi was doing any pawning business. Yet that apart, the contention of the assessed that Smt. Janki Devi received Rs. 20,000 in cash from her mother and that from the said capital and the alleged income she was to remit amounts to her parents is also not proved by evidence as to any remittance. The all important will since relied upon by the assessed speaks of the fact that after the death of the parents, the alleged amount was to be shared by all the daughters of the said Smt. Bhano Devi, that all the sisters of Smt. Janki Devi were to share the amount but Smt. Vidya Devi the sister of Smt. Janki Devi, however, pleaded ignorance about any will. Another sister of the said Smt. Janki Devi (Smt. Sushila Devi) filed an affidavit, but did not come forward for cross-examination when required by the Department. Shri Ram Prasad at the time of search and seizure operation, categorically stated that the assessed firm was thinking of making a petition before the Settlement Commission and at that time S/Sh. Malti Prasad and Sudhir Kumar were also present. There was no whisper of any other explanation much less the theory that Smt. Janki Devi was carrying on business on behalf of her mother Smt. Bhano Devi. Again this Girvi was found at the business premises of the assessed firm and not at the residence premises of Smt. Janki Devi and if Smt. Janki Devi was carrying on any pawning business and the said business was being carried on by her on behalf of her mother as alleged and contended, the Girvi could not have been found from the business premises of the firm. Yet again except the alleged will, there is no evidence that cash of Rs. 20,000 and 100 tolas of jewellery had been given to Smt. Janki Devi by her parents. The statement of one of the sisters of Smt. Janki Devi (Smt. Vidya Devi) does not inspire confidence as to there being any will since she pleaded ignorance. The other sister (Smt. Sushila Devi) did not come forward for examination when the revenue required it. At the time of hearing of these appeals before us, in reply to a query from the Bench, it was admitted that although the parents of the said Smt. Janki Devi had died, the amount claimed by Smt. Janki Devi as being to her mother had not been distributed to the rightful claimants as on date. Shri Bhatnagar, the learned counsel for the assessed while conceding that there has been no distribution of the above amount. pleaded that it could not have been done due to the consequence arising out of search and seizure operation. In the face of all this evidence, the reasoning of the lower authorities stands to reason and calls for no interference. We adopt the reasoning of the lower authorities in relation to above issue and decide against the assessed. Rs. 54,100 is held to represent the concealed income of the assessed firm since the explanation of the assessed is not convincing and the addition as such, stands sustained.”
15. From the foregoing detailed narration of the facts, the following factual situation emerges :
(1) That the assessed family consisted of Sh. Malti Prasad, the karta, his wife Janki Bai and his three unmarried daughters.
(2) That it was from the strong room of the family that the cash in question was discovered. That Sh. Malti Prasad was not only the karta of the family but the lone male member of the family earning the livelihood for the family.
(3) That the unmarried daughters and the wife did not carry on any independent business and that it was the assessed and the firm in which he was a partner that were carrying on the business of pawning ornaments and money-lending etc.
(4) That the story of pawning business being done by Smt. Janki Bai as a trustee of her sisters was found not only by the lower authorities but by the Tribunal also totally unreliable and unproved.
(5) That the additions made to the income of the assessed family by the ITO with regard to the cash and jewellery have been confirmed by the Tribunal, after detailed examination of the assesseds case.
(6) That, while finalising the assessment of the family, part of the silver ornaments and all of the gold ornaments were excluded, as proper evidence had been led to show that the same were the Stridhan either of Smt. Janki Bai or the wives of the married sons of the assessed and the married daughter of the assessed.
(7) That with regard to the sum of Rs. 96,000, the explanation originally given by the karta of family Sh. Malti Prasad, on the date of the search was altogether different and it was abandoned in the course of the assessement proceedings, as it was palpably unsupportable and improbable. The said explanation was, however, substituted by an equally fantastic explanation of the finding of the money at the bank of the Holy Ganges by the younger daughter of Smt. Janki Bai in June 1976. No corroborative evidence whatsoever has been led in support of the above explanation.
(8) That the said amount was assessed in the assesseds hands by the ITO, after rejecting the assesseds offer to treat it as his income, provided that no penalty proceedings were initiated.
(9) That the assessed challenged before the CIT (A) the inclusion of the aforesaid amount of Rs. 96,000 in the income of the assessed family, but the said challenge was negatived by the learned CIT (A).
(10) That the assessed did not go in appeal against the above confirmation of the addition of Rs. 96,000 in the hands of the assessed family, even though penalty proceedings stood already initiated against him, and the alleged offer of the assessed had been spurned by the authorities below.
(11) That the other additions of Rs. 8,085, Rs. 9,000 and Rs. 2,050 (on account of jewellery) were challenged by the assessed before the Tribunal.
(12) That the Tribunal rejected the above appeal of the assessed and confirmed the additions in question.
(13) That the income of the family as finally assessed stood at Rs. 2,13,928, as against the returned income of Rs. 35,469.
16. It is in the setting of the aforesaid factual situation that I have to see whether or not the levy of penalty on the assessed have to see whether or not the levy of penalty on the assessed for concealment of income could be justified. The provisions of section 271(1) (c), as they stood on the date of the filing of the return of income, namely, 11-7- 1977, were as below :
“If the ITO…. in the course of any proceedings under the Act, is satisfied that any person,
(a)….
(b)….
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty….
Explanation I : Where in respect of any facts material to the computation of the total income of any person under this Act,-
(A) such person fails to offer an explanation or offers an explanation which is found by the ITO…. to be false, or
(B) such person offers an explanation which he is not able to substantiate, 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 income in respect of which particulars have been concealed :
Provided that nothing contained in this Explanation shall apply to a case referred to in clause (b) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts income have been disclosed by him.”
17. The aforesaid provisions of law provide for imposition of penalty on the assessed for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation I explains as to what may amount to concealment and furnishing of inaccurate particulars of income. According to it, if an amount is added to the total income of a person, such addition shall for the purposes of clause (c), be “deemed to represent the income in respect of which particulars have been concealed”, in case no explanation is offered for the said amount or the explanation offered is found to be false by the ITO. Similar presumption also arises in case, where, though an explanation has been offered, yet the assessed is not able to substantiate the explanation. Proviso to the said Explanation I of course, provides an escape route from the rigorous of the presumption raised by the Explanation in cases covered by clause in I (B). According to it, if the explanation given by the assessed is “bona fide”, and if all the facts relating to the explanation and material to the computation of the total income have been disclosed by the assessed, the presumption raised by the Explanation I (B) may stand rebutted. I have, therefore, to see whether in the present case, prima facie case of concealment has been made out and whether presumption raised by Explanation I is raised in the assesseds case.
18. Addition, inter alia, of Rs. 96,000 has been made to the total income to the assessed. This addition shall, for the purposes of clause (c) of sub-section (1) of section 271, be deemed to represent the income in respect of which particulars have been concealed, unless the assessed is able to offer an explanation which takes him out of this presumption or offers an explanation, which, though he is not able to substantiate, is nevertheless bona fide, and all the facts relating to the said explanation have been placed by him on record, and all the facts material to the computation of his total income have been disclosed by him.
19. In this law, it is significant to note, the initial onus to get out of the presumption raised by the addition in question is on the assessed, and it will be wrong to saddle the department with the burden of proving the concealment. The law as stands now is altogether different from what it was when the judgment of CIT v. Anwar Ali [1970] 76 ITR 696 was rendered by their Lordship of the Honorable Supreme Court. The law as it was earlier, was amended by the Legislature, for the first time, in 1964. There after the present law came as amended in 1976. The law, as amended in 1964, came up recently for consideration before their Lordships of the Honorable Supreme Court in the case CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14. Their Lordships explained it, inter alia, as below :
“Under the law as it stood prior to the amendment of 1964 the onus was on the Revenue to prove that the assessed had furnished inaccurate particulars or had concealed the income. Difficulties were found in proving the positive element required for concealment under the prior to the amendment and this had to be established by the Revenue. To obviate that difficulty, the Explanation was added. The effect of the Explanation was that where the total income returned by any person was less than 80 per cent of the total income assessed, the onus was on such person to prove that the failure to file the correct income did not arise from any fraud or any gross or willful neglect on his part and unless he did so, he should be deemed to have concealed the particulars of his income or furnished inaccurate particulars, for the purpose of section 271(1). The position is that the moment the stipulated difference was there, the onus to prove that it was not the failure of the assessed or fraud of the assessed or neglect of the assessed that caused the difference shifted to the assessed but it has to be borne in mind that though the onus shifted, the onus that was shifted was rebuttable. If in an appropriate case, the Tribunal or the fact finding body was satisfied by the evidence on the record and inference drawn from the record that the assessed was not guilty of fraud or any gross or willful neglect and if the Revenue had not adduced any further evidence, then, in such a case, the assessed cannot come within the mischief of the section and suffer the imposition of penalty. That is the effect of the provision.”
While deserving as above, their Lordships expressed their complete agreement with the enunciation of law by the Full Bench of the Honorable P & H High Court in the case of Vishwakarma Industries v. CIT [1982] 135 ITR 652. The elaborate decision in the said judgment was concluded by their Lordships as follows :
“To conclude, it must be held that the patent intent to the Legislature in amending section 271(1) (c) and in inserting the Explanation thereto by the Finance Act of 1964 was to bring about a change in the existing law. Consequently, the ratio of Anwar Allis case [1970] 76 ITR (SC) which had considered the earlier provision of section 28(1) of the 1922 Act, is no longer attached. The true legal import of the Explanation is to shift the burden of proof from the department on to the shoulders of the assessed in the class of cases where the returned income was less than 80 per cent of the income assessed by the department. In this category of cases, the Explanation raises three rebuttable presumptions against the assessed as spelt out in detail above in paragraph 16 of this judgment. The onus of proof for rebutting these presumptions lies on the assessed. This burden, however, can be discharged (as in civil cases) by the preponderance of evidence. Equally it would be permissible in the penalty proceedings for the assessed to show and prove that on the existing material itself the presumption raised by the Explanation stands rebutted.”
20. The aforesaid Explanation, which was the subject matter of interpretation by the Lordships as above, has since been replaced, as noted earlier, by the present Explanation, and the requirement of 80 per cent has also now been waived. Now any addition made the returned income for arriving at the total income of the assessed has to be deemed to be concealment requiring for the explanation of the assessed. If the explanation given by the assessed is false, or if no explanation is given by the assessed, the presumption raised become absolute, and imposition of penalty on the assessed for concealment without anything further to the done by the ITO is justified. If, however, the assessed gives any explanation, which is not false, on the face of it, but which he is not able to substantiate, the presumption of concealment would still arise, but it will be rebutted and no penalty will be imposed on the assessed if the said explanation is found to be bona fide and if all the facts relating to the explanation and material to the computation of his total income have been disclosed by the assessed. Thus, under the new law, the onus is on the assessed, and that onus can be discharged by him by either giving an explanation which he is able to substantate, or by giving an explanation, which, though he is not able to substantiate, is bona fide and place all the facts relating to the said explanation and material to the computation of his total income or record.
21. In the light of the aforesaid law, the facts of the present case have to be viewed with a view to find out whether the assessed has been able to discharge the burden, which was on him of giving an explanation, which, though he is not able to substantiate, is yet bona fide and whether the assessed has placed on record all the facts relevant to the said explanation and material to the computation of the assesseds total income.
22. The assessed is a family represented by the karta of the family. It will not, therefore, in my opinion, be correct to call the family as an impersonal thing. The family acts through the karta and all the assets of the family have to be looked after by the karta. The individual members of the family may have their individual assets depending on the evidence in respect of the acquisition of the said assets. In the present case, search of the residence of the family was carried out. In the said residence, there was a strong room, wherein cash and other assets were found located. As the karta of the family, therefore, it was, prima facie, for the karta to explain as to whom the said assets belonged. If there is no explanation, or the explanation of the karta was not satisfactory, the asset in question would be deemed to be belonging to the karta representing the family in whose possession and custody the said asset was found. Sub-section (4A) of section 132 introduces the aforesaid principle of rule of evidence (section 110 of Evidence Act) into the Income-tax Act and reads, inter alia, as below :
“Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed –
(1) That such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;…”
The cash having been found in the strong room of the assessed family it is the karta of the family on whom lay the onus to explain it. He did explain its source to the extent of Rs. 15,000 and the same was accepted by the ITO. The explanation of the assessed with regard to the remaining cash, as given at the time of the search was that the entire cash belonged to Smt. Janki Devi and that she had accumulated it out of the business of pawning which she had been doing since 1946. The case of Sh. Mallti Prasad was that the jewellery, received by his wife in marriage being 120 tolas and 100 tolas and 100 tolas respectively from the father and father-in-law was disposed of by him in 1946 and that the sale proceeds were thereafter lent by his wife on interest and that it was the said money, which had, over a period of 30 years, grown into the present amount. This explanation of the assessed i.e., the karta of the family, was pap ably false, and as such it was altogether given up during the course of asst. proceedings, and it was later explained by the family that Rs. 9,000 belonged to Smt. Bhano Devi, the mother-in-law of the karta, that Rs. 8,025 represented the savings of Smt. Janki Bai, that Rs. 15,000 represented the money of Smt. Pushpa, which was left by her with her mother Smt. Janki BAi, and that Rs. 96,000 belonged to Smt. Janki Bai who had shown the same in her return. When Smt. Janki Devi was examined to indicate the source of the acquisition of the said sum of Rs. 96,000, the totally unsubstantiated and unbelievable explanation came from her that she had got a bag lying at the bank of Ganges in Haridwar, which was picked up by her and was taken to her home and when opened was found to contain the currency of Rs. 96,000 therein. She was examined about the said explanation by the ITO, and it was found out as a result of her examination that she did not make a police report of the said find on the alleged ground that she had not opened the said bag at Haridwar, and the reason given for not opening the said bag was that she was afraid to open it. It is difficult to conceive as to why she was afraid of opening the bag, when she, prima facie, had no inkling of its contents, and if without opening it, she was afraid of the said bag, then, why did she pick it up in the first instance, and having done so why she did not make a report to the police after discovering the real contents of the said bag. Nothing prevented her from making such a report to the police and surrendering to the Government what was not hers. She did not do what obviously an honest and straight forward person would do. The whole explanation smacks of a fairy tale and is totally unbelievable and unsubstantiated and cannot be regarded as bona fide. It may even be termed as fantastic. Realizing this untenable position, the assessed ultimately agreed to get the same assessed in the hands of the family as its income, but still Sri Malti Prasad wanted to have a bargaining counter and, therefore, wanted the IAC to offer to him non-imposition of penalty, in case he offered the amount for asst. in the hands of the family. This offer was ignored by the ITO and as well as the IAC, who did not agree to the non-imposition of penalty in the hands of the family for the disclosing the facts with regard to the said Rs. 96,000 and who, therefore, included the said sum in the total income of the assessed and also initiated penalty proceedings. Because the addition in question was not in terms of the offer of the assessed to the ITO, the said addition was questioned in appeal by the assessed, before the CIT (A). The appeal of the assessed was rejected by the CIT (A) for the reasons noted above. Thereafter, if the assessed genuinely felt that the said sum of Rs. 96,000 was not its income, it could have appealed against the addition of the said amount to the total income of the assessed, when it filed appeal to the Tribunal against other smaller additions. The omission on the part of the assessed to question the addition of Rs. 96,000. In the total income of the assessed before the Tribunal tells its own tale, namely, that the assessed family knew that it was its income and that it had no case whatsoever against the said addition. The ITAT has, after examining the facts of the case, given the finding that Smt. Janki Devi carried out no business, as alleged by her of pawning the ornaments. It is the final finding of fact and cannot be ignored. Even if she had done the business of pawning, it was never the case of the lady that Rs. 96,000 had been earned by her out of the aforesaid alleged business. The case of the assessed, on the other hand, to begin with, was that the aforesaid amount, which was discovered from the strong room of the family, belonged to Smt. Janki Devi, as she had been doing business with the sale proceeds of the gold ornaments allegedly sold in 1946. The said explanation of the assessed was palpably false and, therefore, was given up later.
23. It may be of interest to note at this point the guidelines provided by the Honorable Supreme Court in the case of Mussadilal Ram Bharose (supra) at page 22 for evaluating the explanations given by the assessed. Their Lordships were considering the observations of the Full Bench of the Patna High Court in the case of Nathulal Agarwala & Sons (supra), and while doing so, they approved of the following observations of the Honorable Patna High Court :
“The Patna High Court emphasised that as to the nature of the explanation to be rendered by the assessed, it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given, the burden placed on him would be discharged and the presumption rebutted. We agree. We, further agree that it is not the law that any and every explanation by the assessed must be accepted. IT must be an acceptable explanation acceptable to a fact finding body.”
It is the above test that has been applied by me to evaluate the value of the various explanations given by the assessed to explain away the source of the aforesaid sum of Rs. 96,000. The first explanation of the assessed was false. The second explanation given by Smt. Janki Bai was fantastic and unacceptable. The explanation is neither bona fide, nor full facts having a bearing on the acquisition of Rs. 96,000 have been placed on record. In the circumstances, the onus which was on the assessed family to bring its case within the proviso to the Explanation I to section 271(1) (c) remains undischarged. The presumption raised by the Explanation, therefore, that the addition of Rs. 96,000 is the concealed income of the assessed remains unrebutted. In the circumstance, the imposition of penalty on the assessed was entirely called for and justified in respect of the aforesaid amount.
24. The learned CIT (Appeals) has held that the penalty should not be imposed on the assessed with regard to the additions of Rs. 9,000, Rs. 8,025 and Rs. 20,500. The department is in appeal against the aforesaid finding of the learned CIT (A). So far as the addition of Rs. 20,500 is concerned, the explanation of the assessed has been rejected on the ground that it was unsubstantiated. Part of the silver ornaments discovered from the strong room were accepted by the revenue authorities themselves as belonging to the ladies of the house. Part of the amount namely Rs. 20,500 was added back on estimate basis on the ground that to that extent the explanation was not substantiated. The explanation for that reason cannot be held to be not bona fide. This being so, the imposition of penalty with regard to the aforesaid sum of Rs. 20,500 was not, in my opinion, justified. On this point, I, therefore, confirm the order of the learned CIT (Appeals).
25. With regard to the addition of Rs. 8,025 also the explanation of the assessed was that the said sum was the saving of Smt. Janki Devi. This explanation was rejected, because it was not substantiated. It is, however, not possible to say that the said explanation is not bona fide, because the said lady did make a declaration under Voluntary Disclosure Scheme of 1975 of being dispossession of Rs. 50,000. Income from the aforesaid amount could arise to Smt. Janki Devi and, therefore, so far as HUF was concerned, the money stood explained in its hands. It belonged to Smt. Janki Devi and, therefore, if any action was warranted on account of the discovery of the aforesaid amount, it would be in the hands of Smt. Janki Devi and not in the hands of the HUF.
26. The finding of the learned CIT (A) with regard to the sum of Rs. 9,000 however, is not correct. The aforesaid sum was stated to be part of the alleged business of pawning, which was alleged to have been done by Smt. Janki Devi as a trustee of the pawned ornaments, which were discovered from the business premises of M/s Malti Prasad Ram Prasad. The above theory of Smt. Janki Devi doing business as a trustee was considered by the Tribunal at length in the case of the firm and the entire theory has been discarded by the Tribunal, vide the observations of the Tribunal quoted in paragraph 14 of this order at length. The Tribunal has held in the said order that there was no evidence whatsoever to support the averment that Smt. Janki Devi was doing any pawning business. The findings of the Tribunal on the aforesaid subject are findings of fact, which have become final, and as such it is not possible to ignore the said findings of fact, more particularly when no evidence whatsoever has been led in the penalty proceedings by the assessed to show that the said findings of fact reached by the ITAT were wrong. The amount in question to the extent of Rs. 54,600 stands added to the total income of the aforesaid firm. The explanation given by the assessed with regard to it has been found by the Tribunal not only unsubstantiated but improble. The observations of the Tribunal on this point, may it be repeated again, was : “There was no whisper of any other explanation much less the theory that Smt. Janki Devi was carrying on the business on behalf of her mother Smt. Bhanu Devi”. The Tribunal pointed out that the Girvi was found at the business premises of the assessed firm and not at the residential premised of Smt. Janki Devi and observed that “if Smt. Janki Devi was carrying on any pawning business and the said business was being carried on by her on behalf of her mother as alleged and contended, the Girvi could not be found from the business premises of the firm”. The Tribunal further pointed out that but for the alleged will of Smt. Bhanu Devi, there was no evidence that cash of Rs. 20,000 and 100 tolas of jewellery had been given to Smt. Janki Devi by her parents”. So far as the will was concerned, the Tribunal pointed out that it was not genuine and that no other person who would be the beneficiary of the alleged will came forward and accepted the genuineness and existence of the said will. The Tribunal referred to the statement of Smt. Vidya Devi, another sister of Smt. Janki Devi in this regard and also pointed out that the other sister Smt. Sushila Devi who did come forward on this subject, however, failed to appear before the ITO for cross-examination on the basis of the said averment in the affidavit. Apart from the above, the Tribunal pointed out that “there has been no distribution of the above amount amongst the alleged beneficiaries as per the will”. The theory of the will was thus totally discarded by the Tribunal. In the fact of the above finding of the Tribunal. I find myself unable to hold that the assessed has been able to discharge its burden in terms of the proviso to Explanation I of section 271(1) (c) in regard to the addition of Rs. 9,000. The sum did not belong to Smt. Janki Devi. The explanation in this regard is not bona fide; nor all the relevant facts pertaining to this sum have been put forward by the assessed family either during assessment proceedings or in the present proceedings. The sum in question, cannot therefore, be regarded as having been explained by the assessed in terms of regarded as having been explained by the assessed in terms of Explanation (1) to section 271(1) (c). I, therefore, hold that so far as the sum of Rs. 9,000 is concerned, it belonged to the family and no acceptable explanation with regard to it has been put forward by the assessed. Penalty should, therefore, be imposed with regard to this sum.
27. The next contention of the revenue in its appeal was that in this case, penalty should be imposed more than the minimum laid down in the statute. Even the minimum amount would be considerable and, therefore, in my opinion, the finding of the learned CIT (A) on this point need not be interfered with. In view of the above, I dismiss the assesseds appeal and allow partly the departmental appeal.
REFERENCE UNDER SECTION 255(4) OF THE IT ACT, 1961
As it has not been possible for us to come to an agreed conclusion in the appeals captioned above, we refer the following question for the valued opinion of the Honorable Third Member :
“Whether, on the facts of the present case, the imposition of penalty on the assessed for concealment of income in respect of the sums of Rs. 96,000 and Rs. 9,000 is justified ?”
THIRD MEMBER ORDER
Per Shri Ch. G. Krishnamurthy, President – This matter has come before me as a Third Member under section 255(4) of the Income-tax Act, 1961. The learned Members of Delhi Bench A, who heard these appeals could not agree on the conclusion. They formulated the difference of opinion in the following manner and referred the same to me for my opinion :
“Whether, on the facts of the present case, the imposition of penalty on the assessed for concealment of income in respect of the sums of Rs. 96,000 and Rs. 9,000 is justified ?”
2. The facts leading to the levy of penalty are mentioned in sufficient detail in both the order passed by my learned colleagues and I would recount here the facts as found from the order of the learned Accountant Member. The assessed Shri Malti Prasad was a joint family situated at Bijnor carrying on business among others money-lending business and for the assessment year 1977-78 it filed a return of income showing an income of Rs. 35,469, which represented the share of the assessed family in the business of a firm called Malti Prasad Ram Prasad. The assessed family consisted of Shri Malti Prasad karta of the family, his wife Smt. Janki Devi and four sons and three unmarried daughters. Sometime in 1965, a partition took place in the family, when the sons were separated from the joint family. Thereafter the family consisted of Shri Malti Prasad, his wife and three unmarried daughters. The joint family has a two-storeyed house in Dhampur. All the members of the family including the sons, who were separated were living in this house with their families. The first storey was in the occupation of three separated sons and the ground floor was in the occupation of Shri Malti Prasad, where he was living with his wife and three unmarried daughters. In the ground floor there was a common strong room, wherein the valuables belonging to the family were kept for safe custody.
3. On 20th August, 1976, the residential premises as also the business premises of the firm of Malti Prasad Ram Prasad and another firm called Malti Prasad Jagdish Prasad, in which the assessed and his sons were partners, were searched by the Income-tax Department under section 132 of the Income-tax Act, 1961. The search warrants were in the names of the firms and the partners of the said firms. From the portion occupied by the members of the joint family, following cash and ornaments were recovered as per annexure A to the Punchanama :
1. Cash Rs. 1,28,500
2. Gold ornaments valued at Rs. 2,06,500
3. Silver ornaments value at Rs. 48,380
In the course of the search on 20-8-1976 a statement was recorded from the karta of the family Shri Malti Prasad under section 132(4) of the Income-tax Act, in which he stated with regard to the source of the above said cash, gold and silver ornaments as under :
“I live in the ground floor of this house, the entire ground floor is in my possession. I, my wife Janki Devi, my three daughters, Prabha, Vibha and Sudha and my youngest son Sudhir live in it. On the first floor live my three married sons, Jagdish Prasad, Vijay Prasad and Ram Prasad with their respective families. The cash, ornaments and documents which have been found on the ground floor belong to my wife Smt. Janki Bai. They are her individual property. Her father Rai Sahib Seth, Ram Kishan belonged to Mahu Camp. Indore. He declared himself Insolvent to the extent of Rs. 7,00,000 in 1965 and had (prior to it) sent all his wealth to my place to his daughter. My wife is his eldest daughter. There is no documentary evidence in support of the above, not there is any account of this cash and ornaments. My wife was given at the time of her marriage ornaments weighing 120 tolas by my father and 100 tolas by my mother-in-law. They gave about 100 tolas of gold ornaments at the time of the birth of our 10 children from time to time. The rest of the ornaments belong to my sisters-in-law; Smt. Sushila Devi, Smt. Vidya Wati, Smt. Uma, Prem and Geeta. The ornaments belonging to my elder daughters Smt. Santosh Kumar and Smt. Pushpa Kumari and also here.”
On being asked as to whose was the cash recovered from his premises, he stated :
“It belongs to my wife Janki Devi. I had sold some ornaments out of the above in 1946. The sale proceeds were lent on interest. The same money has gradually grown over 30 years into the present amount….”
On being asked if tax was paid since 1946, on the above growth of the funds due to money-lending, Sh. Malti Prasad replied :
“No tax was paid on it as it was Stridhan of Smt. Janki Bai. I had no knowledge of it.
However, when the matte came at the assessment stage, the explanation with regard to the aforesaid cash and ornaments was altogether different. The new explanation with regard to the cash of Rs. 1,28,085 was as under :
“1. Rs. 15,000 belonged to the assesseds married daughter Smt. Pushpa Lata Mittal.
2. Rs. 9,000 belong to the pawning business carried on by the mother-in- law of Sh. Malti Prasad Smt. Bhano Devi.
3. Rs. 8,085 belong to Smt. Janki Devi, wife of Shri Malti Prasad in respecting her savings.
4. Rs. 96,000 belong to Smt. Janki Devi, again, wife of Shri Malti Prasad in respect of which she had filed a separated return wherein the said sum was offered for tax.”
The balance was stated to be the savings of Smt. Usha Rani, wife of Shri Ram Prasad.
4. The Income-tax Officer treated the three sums at serial numbers 2, 3 and 4 as not having been properly explained and added the same amounting to Rs. 1,13,085 as the assesseds income. In regard to the silver ornaments, the Income-tax Officer treated that about half of the quantity of silver could being to the ladies and the other half, which he worked out at Rs. 22,500 was added to the assesseds income as unexplained investments. Besides there was pawned ornaments worth Rs. 4,100. In view of the fact that the assessed was unable to explain the source for these ornaments, the value of these ornaments also was added as the income of the assessed from undisclosed sources.
5. On appeal before the Commissioner (A), the addition on account of unexplained cash of Rs. 1,13,085 was sustained. The addition on account of unexplained silver also was sustained explained except that its extent was reduced by Rs. 2,000. The addition of Rs. 4,100 was, however, deleted.
6. In further appeal the Tribunal, though the addition of Rs. 96,000 was not contested, the additions of Rs. 9,000, Rs. 8,085 and the addition of Rs. 20,500 were contested. However, the Tribunal dismissed the assesseds appeal and confirmed the additions.
7. Here I may have to refer to a few salient facts, which have a direct bearing on the issue of levy of penalty for concealment of income. I have already extracted above the statement recorded from Shri Malti Prasad, karta of the HUF at the time of the search, wherein he traced the money to father-in-law, who was declared insolvent in the year 1965, at which time he was supposed to have given some cash and gold to his wife, which was utilised by her in building up of the cash by carrying on money-lending business. But Smt. Janki Devi had offered a different statement. She stated that sometime in June 1976, she went along with her daughter to Haridwar and at Har Ki Pauri while returning from bath, her daughter found a bag and after reaching Dhampur, when the bag was opened, a cash of Rs. 96,000 was found and that was the cash that was found in search. In fact the lady had filed a separate return after the search, disclosing the sum of Rs. 96,000 with the above explanation. But during the course of proceedings under section 144B of the assessed HUF before the Inspecting Asst. Commissioner, the assessed offered that very sum as income of the joint family notwithstanding the fact that that sum was assessed to tax in the hands of the wife of Shri Malti Prasad but by making a request that no penalty should be imposed, inasmuch as, the joint family was returning that amount by admitting it as its income, not that it was its concealed income but with a view to purchase peace from the department. However, while making the assessment under sec tion 144B, the Inspecting Asstt. Commissioner had categorically denied having given any such understanding or assurance not to levy any penalty. These facts require to be borne in mind before I take up the narration of the facts for the levy of penalty.
8. In response to the notice issued under section 271(1) (c) as to why penalty should not be imposed for concealment of income, the assessed stated that it had not furnished any inaccurate particulars nor concealed its income, that the money belonged to Smt. Janki Devi wife of Shri Malti Prasad and never to the family. It was also stated that the addition made on account of silver ornaments and of Rs. 9,000 and Rs. 8,085, which related to the cash found in the search having their origin from the money said to have been given by the father-in-law of Shri Malti Prasad, the department did not being any positive evidence to show that these sums represented the concealed income of the assessed. Stress was laid on the fact that though the sum of Rs. 96,000 was added as income of the assessed family, it in truth belonged to Smt. Janki Devi but the same was offered in the hands of the assessed family only to purchase peace and there was no admission that this represented the income of the joint family from concealed sources and that amount should not in any manner be considered as concealed income. Reliance was placed upon the decision of the Allahabad High Court in the case of Mansa Ram & Sons (supra) and another decision of the same High Court in the case of Kishan Singh (supra) and another decision of the Gujarat High Court in the case of CIT v. Vinaychand Harilal [1979] 120 ITR 752 and lastly on a judgment of the Punjab & Haryana High Court in the case of Sohinder Singh & Bros. v. CIT [1980] 121 ITR 834. The Income-tax Officer rejected these submissions and held the assessed to be guilty of concealment of income. He stated that the raid was conducted on the residential premises of the assessed and the impugned cash was found in the strong room of the assessed and the explanation offered was false because after shifting the stands twice, ultimately it was offered for assessment. Reference was also made by the Income-tax Officer to the observations made by the Tribunal while dealing with the observations made by the Tribunal while dealing with the additions made in the case of the firm of Malti Prasad Ram Prasad where reference was made to a will said to have been executed by the father-in-law of Shri Malti Prasad. The Tribunal did not believe the story of the will at all and held that the sum relatable to the will, which was Rs. 54,100 was the concealed income of the firm and sustained the addition. The sum of Rs. 9,000 and Rs. 8,085 was the sustained the addition. The sum of Rs. 9,000 and Rs. 8,085 was the off-shoot of that money of Rs. 54,100 confirmed by the Tribunal as the concealed income of the firm and therefore represented the income of the assessed from undisclosed sources. The agreement of the assessed to be assessed on the sum of Rs. 96,000 was only after it was proved to the hilt by the department that the explanations offered earlier were false. Therefore the assessed cannot be given any concession or shown any leniency merely because it offered the amount for taxation, more so when the Inspecting Asstt. Commissioner had clearly pointed out that no assurance was given that no penalty would be levied. Keeping all these things in view, he levied maximum penalty of Rs. 2,30,170 by his order dated 30-3-1983.
9. Thereafter an appeal was filed before the Commissioner (A). The Commissioner (A) after referring to all the facts of the case come to the conclusion that except in so far as the sum of Rs. 96,000 was concerned, in respect of the other items no penalty could be levied because those sums were added only after disbelieving the assesseds explanation and not after substantiating as in the case of Rs. 96,000 that they represented the concealed income of the assessed. With regard to the sum of Rs. 96,000, the Commissioner (A) gave a categorical finding that it represented the concealed income of the assessed after tracing the facts that led to the admission by the assessed. However, having regard to the complexities of the case and the cooperation offered by the assessed, the Commissioner (A) directed that minimum penalty be levied only for the addition to the extent of Rs. 96,000.
10. Aggrieved by this order of the Commissioner (A), the assessed as well as the departmental preferred appeals before the Tribunal. The learned Judicial Member after referring to all the facts of the case and the submissions made, agreed with the view that the assesseds contention that the sum did not belong to it could be believed although the assessed had made an admission for the purposes of taxation of the sum of Rs. 96,000 that this was its income. For this purpose, he placed reliance upon the admission made by Smt. Janki Devi that the sum belonged to her. According to him the Income-tax Officers presumption that the various assets recovered from the house belonged to the assessed had no basis whatsoever. At the very first instance Shri Malti Prasad submitted that the cash and jewellery belonged not to be assessed family but to his wife and daughters. According to him if property was found in a house, in which members of the family live jointly, the person contending that those articles belonged to the individual or the family had to prove it beyond doubt. He also observed that from the various things that were found in the house occupied by the members of the family, no circumstance existed to connect the family as a unit with those properties. According to him the statements of Smt. Janki Devi and Shri Malti Prasad were sufficient to discharge the onus that lay upon them to shift the onus on to the department to prove that the cash and the ornaments actually belonged to the HUF and that burden was not discharged and therefore the penalty was not to be levied at all. He also referred to another fact namely, that even before the search operations, Smt. Janki Devi made a disclosure of Rs. 50,000, which showed that she comes of a rich family and that she was in possession of substantial amounts of cash and the probabilities were that the money disclosed by her as belonging to her did belong to her in truth. In the end he held :
“15. Having considered the entire material on record, we are of the opinion that in spite of the fact that the various additions had been made to the assesseds income in the quantum assessment, it was not a fit case in which penalty could be levied on the assessed because there was no sufficient evidence to show that the assets referred to above belonged to the assessed HUF and the assesseds explanation that the various items belonged to the individual members of the HUF had neither been found to be false nor unsubstantiated. The mere fact that those explanations were not accepted in the quantum proceedings would not automatically authorise the levy of penalty. We are, therefore, of the view that no penalty is leviable in the present case. The assesseds appeal, therefore, deserves to be allowed while that of the department deserves to be dismissed. Accordingly we allow the assesseds appeal and cancel the penalty levied on the assessed. The revenues appeal is dismissed.”
11. The learned Accountant Member, on the other hand, disagreed with these contentions. According to him the department has proved to the hilt that the sums in question belonged to the assessed HUF and the various explanations offered from time to time were false. He placed great reliance on the fact that even though the sum of Rs. 96,000 was shown by Smt. Janki Devi as her money, there was no independent evidence to show that she was capable of earning that money by any business. Ultimately the assessed offered this sum for assessment, which was done. He observed that although the assessed made a plea that no penalty should be levied, since no undertaking or assurance was given by the Inspecting Asstt. Commissioner, the assessed was not absolved from the guilt of concealment of income. By placing reliance upon the order of the Tribunal while dealing with the additions made in the case of the firm Malti Prasad Ram Prasad, he drew support for his view that the sum of Rs. 96,000 did belong to the assessed as its concealed income. He observed that when the assessed accepted the decision that the sum of Rs. 96,000 belonged to it, nothing more remains to show that this sum represented the assesseds income from undisclosed sources. According to the learned Accountant Member the assessed is not saved by the Explanation to section 271(1) (c) because this is a case where it could not be said that the assessed had made a bona fide explanation by disclosing all the facts and materials necessary for the computation of its income. He also could not agree with the placement of burden on the Revenue as was done by the learned Judicial Member. He was emphatic that the omission on the part of the assessed to question the addition of Rs. 96,000 to the total income of the assessed before the Tribunal had its own tell tale. He observed that it was also significant to note that the Income-tax Appellate Tribunal gave a finding that Smt. Janki Devi wife of Shri Malti Prasad carried on no business. By referring to the decision of the Supreme Court in the case of Mussadilal Ram Bharose (supra), the learned Accountant Member pointed out that the moment any fantastic or unacceptable explanation was given, it could not be said that the burden placed upon him was discharged and the onus was shifted. The explanation must be an acceptable one. Applying this test, he held that the onus which was on the assessed to bring its case within the proviso to Explanation I to section 271(1) (c) remained undischarged and therefore the sum of Rs. 96,000 should be taken as the concealed income of the assessed and therefore the assessed must be penalised. He was also of the opinion that the penalty was imposable even in respect of the other sum of Rs. 9,000, which was let off by the Commissioner (A) on the ground that that was a disbelief of the explanation and moreover a part of the explanation was believed and a part of the same explanation was disbelieved, in which event the verdict of concealment could not be passed. There was no reference particularly to this item of Rs. 9,000 in the order of the learned Judicial Member because he was in agreement with the assesseds contention that there was no concealment at all in this case.
12. I heard the arguments addressed to me at length by Shri V. S. Rustagi on behalf of the assessed and by Smt. Manjari Kakar on behalf of the department. I do not wish to burden this order with a reiteration of the chronological events that had eventually led to the levy of penalty for concealment of income. I would only consider one aspect, namely, whether the ingredients of section 271(1) (c) could be said to have been satisfied in this case. The learned Accountant Member has dealt at great length in his order about the essential ingredients that are necessary to be present to record a verdict of concealment of income. I am in entire agreement with that enunciation of the ingredients. The learned Judicial Members view has been that the explanation offered by the assessed at the very first instance denying the ownership of the sum found in search in his house coupled with the return filed by Smt. Janki Devi admitting the income as her own and her statement that the money belonged to her was sufficient in law to discharge the onus that lay on the assessed and to shift the same on to the Revenue to prove that the cash and the ornaments actually belonged to the assessed HUF. With great respect, I am unable to subscribe to this view. It is ordinary human conduct to deny the possession of money as soon as a search takes place by a law enforcing agency much more so by the Income-tax authorities. The statement given under those circumstances no doubt can be prima facie evidence but cannot be said to be conclusive. That it could not be true and conclusively absolve the assessed HUF from this guilt of concealment of income was fortified by the fact that Smt. Janki Devi gave a different version for the acquisition of the money, namely, finding it on the banks of the river Ganges when she went on pilgrimage. As against the explanation of Shri Malti Prasad that that sum represented the accumulation out of money-lending business carried on by him with the money provided to Smt. Janki Devi by her father on the eve of his insolvency and the sale of jewellery received by her at the time of marriage and subsequently on child births far from corroborating this statement, she put up a different story for that that money did represent the find on the banks of the river Ganges. Thus the statement of Shri Malti Prasad was not corroborated and it was deviated from in all material particulars. Although Smt. Janki Devi admitted the ownership of the money, the source given for that is so unbelievable that both the learned Members were categorical in stating that the story was far from truth. When the source for such a huge sum was held to be unbelievable by both the learned Members, I fail to see what credence can be given to her statement of admission that the money belonged to her. It is no more than a statement given to some how help her husband to wriggle out from a very inconvenient situation where he was caught. That apart the Income-tax Appellate Tribunal while dealing with the case of Malti Prasad Ram Prasad had categorically stated that Smt. Janki Devi was not carrying on any money-lending business and on that view, it confirmed the addition of Rs. 54,100. This indicates that even the explanation given by Shri Malti Prasad about the source of this money of Rs. 96,000 was far from truth because he stated that it was out of accumulation of the money-lending business that Smt. Janki Devi was supposed to have carried on that the money had come from. Thus the statements of Smt. Janki Devi and Shri Malti Prasad could not be taken to be true and correct because they failed to prove even by a modicum of truth about the source of money. What is the use of a statement owning up money, when the source of money was false. To cap it all Shri Malti Prasad eventually admitted that the money belonged to him and offered it in its assessment with a request for waiving of penalty. I do not think any more proof is needed to shown that there was no truth in the statements of these persons. If anybody had lost his huge sum of Rs. 96,000 on the banks of the river Ganges, one would expect him or her to lodge a police complaint and the enormity of the money lost would also invite publicity in papers. Nothing of the sort having happened, this story is rightly disbelieved not only by my learned Brothers but by Shri Malti Prasad himself, as a sequel of which he went before the Inspecting Asst. Commissioner and offered the amount for assessment. Therefore I am of the view that the statements of Smt. Janki Devi and Shri Maliti Prasad were not sufficient to discharge the onus that lay upon them. The onus that lay on the Revenue was fully discharged in this case. As rightly pointed out by the learned Accountant Member it is not that every explanation given by the assessed must be accepted as correct howsoever fantastic it is. The explanation must be an acceptable explanation to a fact finding body. The approval of this statement of lay made by the Patna High Court, by the Supreme Court is very relevant and significant in this case. I am of the opinion that the assessed had not discharged the onus that lay on him and that the explanation offered by the assessed was not bona fide and that all the facts relating to the same and the material to the computation of total income were not truly disclosed by the assessed. The penalty is therefore leviable and was rightly imposed.
13. I am however of the opinion that in respect of the sum of Rs. 9,000 for the reasons given by the Commissioner (A) with whom I agree, the penalty is not leviable.
14. The matter will now go before the regular Bench for disposal of the appeals according to majority opinion.