ORDER
D.S. Meenakshisundaram, Vice President
1. These two appeals are directed against the orders of the DC(A) confirming the penalties levied against the assessee under Section 271(1)(c) of the Income-tax Act, 1961.
2. These appeals arise out of the income-tax assessments of Miss Asha Dalmia, the assessee herein. The assessment years are 1977-78 and 1979-80 for which the previous years ended on 31-3-1977 and 31-3-1979 respectively. While completing the assessments for these two years under-Section 143(3)/146 of the Act, the ITO added a sum of Rs. 17,000 in the assessment year 1977-78 and a sum of Rs. 20,000 in the assessment year 1979-80 as unproved cash credits under Section 68 of the Act. He further disallowed the interest relating to these cash credits. In the first year, the cash credit appeared in the account of one Naresh Umesh Dalmia on 1-4-1976, while, in the second year, the cash credit was in the account of M/s. Sulochana Enterprise on 1-4-1978. These additions were sustained by the Appellate Tribunal and there is no dispute now that the orders of the Tribunal have become final. The ITO levied the penalties under Section 271(1)(c) of the Act for alleged concealment of income with reference to these cash credits in both the years. He invoked the provision of Explanation 1 to Section 271(1)(c) of the Act to hold that there was concealment of income to the extent of these cash credits plus the interest relating to the said loans which was disallowed. He, therefore, imposed a penalty of Rs. 11,000 for the assessment year 1977-78 and a penalty of Rs. 14,000 for the assessment year 1979-80. These penalties were confirmed by the DC (A) who agreed with the ITO to confirm the penalties levied by him. Aggrieved by these orders of the DC(A), the assessee has come up on further appeal to the Tribunal.
3. Shri D.S. Damle, the learned Chartered Accountant for the assessee submitted that the assessee is a handicapped person both physically and mentally as she is a mentally retarded and dumb person, that whatever evidence was available with the assessee to prove the genuineness of the credits in question was placed before the departmental authorities, that the inability of the assessee to substantiate her case or produce evidence to the satisfaction of the departmental authorities would not mean that these credits represented her concealed income, particularly having regard to the fact of her mental and physical disabilities and that, therefore, the departmental authorities were not justified in imposing penalties under Section 271(1)(c) of the Act. He, therefore, pleaded that the penalties should be cancelled.
4. Shri S.C. Chatterjee, the learned Departmental Representative justified the levy of penalties by pointing out that in spite of her physical and mental handicaps the assessee had signed the memoranda of appeal which showed that she was capable of understanding the relevant facts and that in spite of opportunity given by the ITO the assessee was unable to prove her claim that these were genuine loans from the parties and that, therefore, the levy of penalties was justified.
5. I have carefully considered the submissions urged on both sides in the light of the materials placed before me.
6. The additions of cash credits of Rs. 17,000 and Rs. 20,000 were the subject matter of appeal to the Tribunal in ITA Nos. 687-689 (Cal.)/88 and these additions were sustained by the order of the Appellate Tribunal dated 8-12-1989 a copy of which appears at pages 18 to 23 of the assessee’s paper book. It is, therefore, clear that the additions of these cash credits have been sustained by the Tribunal on the ground that their genuineness had not been proved by the assessee. As stated already, there is no dispute that these orders of the Tribunal have become final. Therefore, the findings of the Tribunal would certainly constitute good evidence in favour of the Revenue and against the assessee, though they may not be conclusive in regard to penalty proceedings.
7. As stated already, these penalties had been levied by holding that the assessee had concealed particulars of her income within the meaning of clause (B) of Explanation 1 to Section 271(1)(c) of the Act. A perusal of the assessment order for the assessment year 1977-78 shows that a sum of Rs. 17,000 is recorded as a cash loan received by the assessee from Naresh Umesh Dalmia on 1-4-1976. It is also stated in the assessment order that this sum was utilised on the same date partly for the purchase of potatoes. The assessee had produced a confirmatory letter from this creditor which was on record. However, the ITO wanted to examine the creditor to whom he issued summons on 12-2-1986 a copy of which is at page 16 of the assessee’s paper book. This summons shows that it was addressed to Shri Naresh Umesh Dalmia, C/o. Panalur Paper Mills Ltd., P.O. Panalur, Kerala. It was explained by the assessee’s learned Chartered Accountant that this creditor was originally employed in Panalur Paper Mills Ltd., but after its closure he was no longer in the service of the said company. To a specific question put by me it was stated by the assessee’s learned Chartered Accountant that this gentleman is distantly related to the assessee but that the assessee could not contact him as he was no longer in the service of Panalur Paper Mills Ltd., of which the assessee’s father is the Managing Director. A perusal of the confirmatory letter on record shows that the loan amount of Rs. 17,000 was returned to the creditor sometime in October 1976. The order of the Tribunal further shows that the said creditor was assessed in B-Ward, Quilon. There is no dispute that the assessee is a dumb person and that she is also mentally retarded. A perusal of the assessment orders for these two years shows that the business in the purchase and sale of potatoes was done for the benefit of the assessee by her parents Shri L.N. Dalmia and Smt. Savitri Devi Dalmia and that the profits of the potato business belonged to the assessee. This would be clear from paragraph 6 of the assessment order for the assessment year 1977-78 which is quoted below :
The assessee is the daughter of Shri L.N. Dalmia and Smt. Savitri Devi Dalmia. She is mentally retarded and is dumb. Her mother is one of the two partners of the firm styled M/s. Kashi Cold Storage. The other partner is M/s. Kashi Cold Storage (P.) Ltd. in which Smt. Savitri Devi Dalmia as well as Shri L.N. Dalmia are Directors. The assessee is also one of the shareholders of this private limited company. It is claimed that the business of purchase and sale of potatoes was done for the benefit of the assessee and the profits thereof belonged to her.
8. The position in regard to the cash credit of Rs. 20,000 in the assessment year 1979-80 is also similar. This cash credit appeared in the account of M/s Soluchana Enterprise on 1-4-1978. The address of this party is available in the record of the case as could be seen from the summons at page 17 of the assessee’s paper book which was issued by the ITO. It is also clear from the penalty order that M/s Sulochana Enterprise was an income-tax assessee and its file number is also mentioned in the penalty order. The reason why the ITO had added this amount in the hands of the present assessee is because the creditor had not shown this loan amount and the interest thereon in its books of account or assessment. This would, however, show that the assessee has been able to prove the identity of the party which is a firm assessed in Calcutta and that the assessee had also placed all the relevant facts relating to this loan taken from this firm and had not kept back any facts relating to the same. I find myself unable to appreciate how the departmental authorities came to the conclusion that these two cash credits represented the concealed income of the assessee.
9. In the light of the above facts I am of the considered view that the assessee could not be held to have had any mens rea to hold that there was concealment of income much less deemed concealment of income, or furnishing of inaccurate particulars thereof by the assessee within the meaning of clause (B) of Explanation 1 to Section 271(1)(c) of the Act. On the contrary, I am of the view that the assessee’s case would squarely fall within the proviso to clause (B) of Explanation 1 to Section 271(1)(c) of the Act as there is no material or circumstance which would show that the explanation offered on behalf of the assessee is not bona fide and that the assessee had not disclosed all the facts relating to these two cash credits. The facts of the case clearly establish that the assessee could not have had any guilty mind because she is a mentally retarded person. Therefore, there was no question of any deemed concealment within the meaning of the provisions of law relied on by the departmental authorities. I, therefore, accept the contentions urged on behalf of the assessee and hold that no penalty is exigible on the facts of the present case. Accordingly, I cancel the penalties levied by the assessing officer under Section` 27l(1)(c) of the Act in both the years. The amounts of penalty, if already collected from the assessee, shall be refunded to her.
10. In the result, both the appeals are allowed.