ORDER
M.A. Bakshi, Vice President
1. The appeal of the assessee for assessment year 1990-91 is directed against the order dated 26.8.2002 of the CIT(A), Rohtak.
2. Parties have been heard and record perused.
3. The relevant facts in this case are that two cash credits had appeared in the books of account of the assessee as under :-
i) Smt. Gurdev Kaur Rs. 23,000/- ii) Sh. Amarjit Singh Rs. 35,000/-
The assessee had furnished affidavits of the creditors before the AO. Subsequently, the creditors appeared before the AO and the latter recorded their statements on 11.1.91. The assessee was asked to explain the source of the credits. Smt. Gurdev Kaur in her affidavit had stated that she owned 30 acres of canal and tubewell irrigated agricultural land in village Fatuhiwala/Singhewal, Faridkot along with her husband from which annual income of Rs. 60,000/- was being received. The loan of Rs. 23,000/- to the assessee was stated to have been given out of the agricultural income. However, as per the statement of Shri Boota Singh, h/o Smt. Gurdev Kaur, it came to light that Smt. Gurdev Kaur was not having any agricultural land in her name. Copy of the bank account No. 1606 with Punjab & Sind Bank, Dabwali was also furnished before the revenue authorities. A perusal of the bank account revealed that the said account was in the joint name of Smt. Gurdev Kaur and Smt. Baljit Kaur (her married daughter). It was also noticed that a sum of Rs. 25,000 was deposited in the said account on 1.5.89. The source of Rs. 23,000/- was explained with reference to the withdrawal of Rs. 23,000 on 2.5.89 from the said bank account. The husband of the creditor Shri Boota Singh had stated in his statement that the amount of Rs. 25000/- was given by him to his wife out of past savings out of agricultural income. The Assessing Officer did not accept the explanation of the assessee as satisfactory and accordingly made an addition of Rs. 23,000/-. It was observed that the explanation in regard to deposit of Rs. 25,000 out of past cash savings with the husband was not acceptable as Shri Buta Singh was also having a bank account in his own name. The Tribunal on consideration of the evidence on record, particularly other deposits and withdrawals in the bank account of the creditor, held that a sum of Rs. 15,000 should be considered as explained and the balance of Rs. 8,000/- as unexplained. Thus, the addition of Rs. 8,000 was sustained in respect of credit from Smt. Gurdev Kaur.
In the case of Shri Amar Singh, the assessee had received a cheque of Rs. 35,000/- on 3.5.89 and the said loan was repaid on 7.2.90 by account-payee cheque. Assessee had furnished affidavit of Shri Amarjit Singh in which it was stated that he owned 30 acres of irrigated land and that a loan of Rs. 35,000 was given to the assessee by cheque out of savings account No. 2606 with Punjab National Bank, Mandi Dabwali and the said amount had been returned on 7.2.90. His statement was also recorded by the AO. The bank passbook was also produced before the AO. In his statement, Shri Amarjit Singh stated that the amount of Rs. 35,000/- cash deposited on 2.5.89 in the bank account was out of savings from agricultural income and that he had also sold one cow for Rs. 6700 or Rs. 7700 before depositing the amount in the bank. The evidence in regard to the landholdings had been filed before the AO. The AO. however, did not believe the genuineness of the credit, particularly when cash of Rs. 35,000 was deposited only one day before the withdrawal and accordingly made the addition of Rs. 35,000. The CIT(A) had also confirmed the addition of Rs. 35,000 as income from undisclosed sources.
4. On appeal, the Tribunal has sustained the addition of Rs. 35,000 mainly on the ground that the deposit of cash of Rs. 35,000 was not satisfactorily explained. The claim that Amarjit Singh owned agricultural land having agricultural income of Rs. 60,000 per annum was not questioned.
5. The AO had initiated penalty proceedings Under Section 271 (1)(c) and imposed a penalty of Rs. 30,386 by invoking Explanation 1 to Section 271(1)(c). However, in view of the relief allowed by the ITAT, penalty has been reduced to Rs. 21,794 by the CIT(A).
6. Assessee is in appeal against the decision of the CIT(A) in sustaining the penalty of Rs. 21,794. The ld. Counsel for the assessee contended that assessee had discharged the primary onus by furnishing necessary evidence to establish the identity of the creditors, their creditworthiness and the genuineness of the credits. It was submitted that affidavits of the creditors had been furnished before the Assessing Officer. The payment had been received by account-payee cheques and repayment had also been made by account-payee cheques (this claim is disputed). Shri Amarjit Singh had appeared before the AO and in his statement he has not only admitted the advancement of loan of Rs. 35,000 but has also explained the source in respect of thereof. The evidence in regard to ownership of agricultural land was also produced before the AO. In the case of Smt. Gurdev Kaur, an affidavit was furnished before the AO, the payment was received by means of account-payee cheques and repayments had also been made by account-payee cheques. The statement of the husband of the creditor had been recorded who had specifically confirmed having advanced the loan to the assessee and had also explained the source of the credit in the bank accounts jointly held by him with his wife, the creditor.
7. According to the Id. Counsel for the assessee, the assessee has discharged the primary onus in regard to cash credits. The explanation of the assessee has been partly accepted in the case of Smt. Gurdev Kaur and not accepted in the case of Shri Amarjit Singh for the purpose of assessment and the addition has been made in view of Section 68. In penalty proceedings, the assessee having furnished necessary evidence in support of the credits and there being no material on record to justify the conclusion that the assessee had concealed the income or furnished inaccurate particulars of income, penalty, according to the Id. Counsel, was not warranted in this case. The ld. Counsel for the assessee relied upon the decision of Punjab & Haryana High Court in the case of CIT v. Sachdeva Steel Rolling Mills, 254 ITR 168, in support of the contention that once the assessee has established the source of the credit, assessee’s primary onus is discharged and that the assessee cannot be called upon to explain the source of credit in the bank account of the creditor. Reliance was also placed on the decision of the Gujarat High Court in the case of National Textiles v. CIT, 249 ITR 125. Reliance was also placed on the decision of the Punjab & Haryana High Court in the case of Vishwakarma Industries v. CIT, 135 ITR 652, in support of the contention that when there is material on record to establish that the explanation of the assessee was not false and that there was no wilful neglect on the part of the assessee, penalty Under Section 271(1)(c) was not warranted. It was accordingly pleaded that penalty Under Section 271(1)(c) may be deleted.
8. The Id. D.R., on the other hand, placed reliance on the decision of the AO as well as that of the CIT(A). It was contended that the addition in this case having been confirmed by the Appellate Tribunal, penalty Under Section 271(1)(c) was justified in view of the Explanation to Section 271(1)(C). It was contended that the decisions of Supreme Court in the case of CIT v. Anwar Ali, 76 ITR 696, and in the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT, 168 ITR 705, are no longer good law after addition of the Explanation to Section 271(1)(c). In this connection, the ld. D.R. placed reliance on the following decisions:-
i) CIT v. Gurbachan Lal, 250 ITR 157 (Delhi);
ii) Vishwakarma Industries v. CIT, 135 ITR 652 (P&H(FB);
iii) K.P. Madhusudhannan v. CIT, 251 ITR 99 (SC);
iv) Om Parkash Gupta v. ITO, 81 ITD 55(Chd.).
The ld. D.R. further contended that the explanation of the assessee was not considered to be satisfactory by the revenue authorities as well as by the Tribunal and no further evidence has been produced by the assessee as a result of which penalty Under Section 271(1)(c) is justified.
9. We have given our careful consideration to the rival contentions. It is well-settled principles of law that whether penalty for concealment of income for furnishing of inaccurate particulars of income is attracted in a particular case or not is dependent on the relevant law as applicable for the relevant assessment year in the absence of which penalty Under Section 271(1)(c) is not attracted.
9.1 In the case of CIT v. Anwar Ali (supra), their Lordships of the Supreme Court had laid down that the onus was on the revenue to establish that there was conscious concealment of particulars of income or a deliberate failure to furnish accurate particulars.
9.2 In the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT (supra), their Lordships of the Supreme Court laid down that the mere fact that the assessee had surrendered the income was not sufficient for imposition of penalty Under Section 271(1)(c).
9.3 The Legislature has amended the provisions of Section 271(1)(c) from time to time and several Explanations have been added to nullify the effect of the Supreme Court judgment referred to above. The effect of the addition of Explanation to Section 271(1)(c) was explained by their Lordships of the Supreme Court in the case of CIT(Addl) v. Jeevan Lal Sah, 205 ITR 244. In this case, their Lordships of the Supreme Court held that the rule regarding burden of proof enunciated in Anwar Ali’s case (supra) is no longer valid It was further held that the principle enunciated in Anwar Ali’s case that mere rejection of the explanation of the assessee is not sufficient for levying penalty no longer holds good and it is no longer necessary that the department must go further and establish that there was conscious concealment of particulars of income or failure to furnish accurate particulars. Their Lordships referred to the decisions of the Supreme Court in the cases of CIT v. Mussadilal Ram Bharose, 165 ITR 14, and CIT v. K.R. Sadyappan, 185 ITR 49, and held that the cases in which Explanation to Section 271(1)(c) is attracted have to be decided in the light of law enunciated in the said cases. Thus, it becomes relevant to ascertain the principles laid down by their Lordships of the Supreme Court in the said cases. In this case, Explanation to Section 271(1)(c) was found applicable and their Lordships of the Supreme Court held that by virtue of the Explanation to Section 271(1)(c), the burden of the assessee to show that the difference in the assessed income was not owing to fraud or gross or wilful neglect on his part had shifted upon the assessee. It was further observed “If, in an appropriate case, the Tribunal or the fact-finding body is satisfied on relevant and cogent material on record and draws an inference thereupon that the assessee was not guilty of gross or wilful neglect or fraud, then, in such a case, the assessee cannot come within the mischief of the section and suffer penalty.” It was further clarified that “the burden placed upon the assessee is not discharged by any fantastic explanation. Nor is it the law that any and every explanation by the assessee must be accepted. It must be an explanation acceptable to the fact-finding body. The conclusion of the Tribunal is a conclusion of fact and no question of law arises.” Their Lordships of the Supreme Court at page 21 of the report approved of the findings of the Punjab & Haryana High Court in the case of Vishwakarma Industries v. CIT, 135 ITR 652. The relevant portion of the judgment of the Supreme Court is quoted hereunder:-
“Our attention was drawn to several decisions to which, out of deference to Shri Manchanda who argued before us on” behalf of the Revenue, we shall refer, Vishwrakarma Industries v. CIT (1982) 135 ITR 652 (P&H) is a decision of the Full Bench of the Punjab & Haryana High Court where Sandhawalia C.J., speaking for the Full Bench, observed that the object and intent of the Legislature in omitting the word “deliberately” from Clause (c) of Section 271(1) of the Income-tax Act, 1961, was to bring about a change in the existing law regarding the levy of penalty so as to shift the burden of proof from the Department on to the assessee in the class of cases where the returned income of the assessee was less than 80% of the assessed income. The learned Chief Justice noted that the significant thing about the change made in Clause (c) of Section 271(1) was the designed omission of the word “deliberately’ there from, whereby the requirement of a designed furnishing of inaccurate particulars of income was obliterated. According to the learned Chief Justice, the language of the explanation indicated that for the purposes of levying penalty, the legislature had made two clear-cut divisions. This had been done by providing a strictly objective and an almost mathematical test. According to the Chief Justice, the touchstone therefore was the income returned by the assessee as against the income assessed by the Department which was designated as “the correct income”. The case where the returned income was less than 80% of the assessed income can be squarely placed into one category. Where, however, such variation is below 20%, that would fall in the other category. To the first category, where there is a larger concealment of income, the provisions of the Explanation become at once applicable with the resultant attraction of the presumptions against such an assessee. Once the Explanation is held to be applicable to the case of an assessee, it straightaway raises three legal presumption, viz. (i) that the amount of the assessed income is the correct income and it is in fact the income of the assessee himself; (ii) that the failure of the assessee to return the correct assessed income was due to fraud; or (iii) that the failure of the assessee to return the correct assessed income was due to gross or wilful neglect on his part. But it must be emphasised that these are presumptions and become a rule of evidence but the presumptions raised are not conclusive presumptions and are rebuttable.
We are of the opinion that the view of the Full Bench of the Punjab & Haryana High Court is a correct view when it states that it only makes a presumption but the presumption is a rebuttable one and if the fact-finding body on relevant and cogent materials comes to the conclusion that in spite of the presumption the assessee was not guilty, such conclusion does not raise any question of law.”
9.4 In the case of National Textiles v. CIT, 249 ITR 125, the Gujarat High Court held that in the absence of positive evidence that the explanation furnished by the assessee in regard to cash credits was false and in the absence of evidence from which inference could be drawn that the credits constitute income of the assessee, penalty Under Section 271(1)(c) was not justified with reference to the Explanation to the said Section. Their Lordships held that “In order to justify the levy of penalty, two factors must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee’s income. It is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was animus, i.e., conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation 1 to Section 271 ()(c) has no bearing on factor No. 1 but has a bearing only on factor No. 2. The explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee’s case is false, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee.” Their Lordships further held that “absence of proof acceptable to the Department cannot be equated with fraud or wilful default.”
9.5 In the case of K.P. Madhusudhanna v. CIT, 251 ITR 99, their Lordship of Supreme Court have held that it was not necessary for the revenue to specifically invoke Explanation to Section 271(1)(c). Once assessee receives a notice Under Section 271, it is for the assessee to establish the circumstances that his failure to return his correct income was not due to fraud or neglect. In case assessee fails to furnish explanation, penalty Under Section 271(1)(c) was held to be attracted. In this case, their Lordships of the Supreme Court further clarified that the decision in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT, 168 ITR 705 was not good law after addition of the explanation to Section 271.
9.6 In the case of CIT v. Gurbachan Lal, 250 ITR 157, their Lordships of Delhi High Court held as under:-
“The principle logical import of the Explanation is to shift the burden of proof from the Revenue on to the assessee. Rebuttal must be on materials relevant and cogent. It is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body, bearing the aforesaid principles in mind, comes to the conclusion, that the assessee has discharged the onus, it becomes a conclusion of fact, and no question of law arises. As observed earlier, the initial burden is on the assessee. Once the initial burden is discharged, the assessee would be out of mischief unless further evidence is adduced. It is plain on principle that it is not the law that the moment any fantastic or unacceptable explanation is offered, the burden placed would be discharged and the presumption rebutted. As pointed out by the apex court in the case of CIT v. Mussadilal Ram Bharose (1978) 165 ITR 14, the burden placed upon the assessee is not discharged by any fantastic explanation. It must be an explanation acceptable to the fact-finding body. These aspects were highlighted by one of us (Arjit Pasayat, Chief Justice) in the case of CIT v. A. Sreenivasa Pai (2000) 242 ITR 29 (Ker) and CIT v. Kishorekumar Shamji (2000) 244 ITR 702 (Ker).
The apex court had considered the effect of change of law by the Finance Act, 1964, in the case of CIT (Addl.) v. Jeevan Lal Sah (1994) 205 ITR 244. With reference to the case of CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14, the apex court had approved the interpretation placed upon the Explanation by a Full Bench of the Punjab & Haryana High Court in Vishwakarma Industries v. CIT (1982 135 ITR 6522. The same issue was also dealt with by the apex court in the case of CIT v. K.R. Sadayappan (1990) 185 ITR 49.”
10. On the analysis of the aforementioned decisions, it is observed that after the insertion of Explanation to Section 271(1)(c), revenue is not required to establish by cogent evidence that assessee has concealed the income or furnished inaccurate particulars of income. Explanation to Section 271(1)(c) creates a presumption against the assessee. The said presumption, however, is rebuttable presumption. The findings in the assessment order constitute good evidence and in the course of penalty proceedings, the assessee has to satisfactorily explain that the explanation furnished is bona fide and that all the facts relating thereto have been disclosed by him. In such cases, where the assessee has given explanation, it will be for the fact-finding body to judge as to whether the assessee has discharged the onus in regard to deeming provisions of Section 271(1)(c). Mere furnishing of an explanation is not enough. The explanation furnished by the assessee should be a plausible explanation and that it is not any fantastic explanation which exonerates the assessee from the rigors of penalty Under Section 271(1)(c). That Explanation to Section 271(1)(c) does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent income with the hypothesis that it does.
11. Let us now revert to the facts of this case in order to determine as to whether the explanation of the assessee in regard to cash creditors is a plausible explanation on the basis of which it could be said that penalty Under Section 271(1)(c) is not attracted. It has been pointed out elsewhere in this order that assessee had furnished affidavits from the creditors indicating the source of the credits. The creditors were identified, the statement of Shri Amarjit Singh was recorded by the AO, the statement of husband of Smt. Gurdev Kaur was also recorded, the money was paid by the creaditor by means of crossed cheque and repayment was also made by means of cross cheques. In the case of one of the creditors, namely, Smt. Gurdev Kaur, a sum of Rs. 15,000 has been held to be explained and Rs. 8,000 has been held to be unexplained. In the case of Shri Amarjit Singh, whereas it is not disputed that he had an annual income of Rs. 60,000 from agriculture, the credit has not been accepted to be satisfactorily explained on the ground that he had deposited the cash in the bank account before the issue of cheque in favour of the assessee. In our considered view, the assessee had furnished prima facie evidence in support of genuineness of the credits, the creditworthiness of the creditors as well as the genuineness of the credits. The revenue as well as the Tribunal have not accepted the evidence to be sufficient for the purpose of discharging the onus within the parameters of Section 68 of the Act. The addition to the extent of Rs. 43,000 has been sustained. So, however, in the case of penalty proceedings, as laid by their Lordships of the Supreme Court, one has to consider on the basis of evidence on record as to whether the explanation of the assessee is plausible. If the explanation of the assessee is plausible, then penalty Under Section 271(1)(c) is not justified. However, if the explanation of the assessee is not plausible, then in the absence of any other evidence furnished by the assessee, penalty Under Section 271(1)(c) may be attracted with reference to the explanation to the said Section. So, however, in this case, we are of the view that the explanation of the assessee is plausible and the very fact that part of the credit was accepted to be genuine supports the view that the remaining part of the credit in the case of Smt. Gurdev Kaur may also have genuinely come from the creditor in respect of which she was not able to satisfy the revenue authorities as well as the Tribunal to establish the immediate source. In the case of Shri Amarjit Singh also, the identity is established, his creditworthiness is also established, the credit has not been accepted as he was not able to establish the immediate source of Rs. 35,000 in the bank account before issue of cheque in the name of the assessee. It is established that Shri Amarjit Singh was man of means insofar as he was having more than 30 acres of land from which income more than Rs. 60,000 was generated every year. Therefore, the source of Rs. 35,000 from his agricultural income was probable and, therefore, for the purpose of imposition of penalty, assessee’s explanation cannot be said to be false. In the light of the explanation of the assessee, the facts and circumstances are equally consistent with the hypothesis that the amount at the credits does not represent income of the assessee with the hypothesis that it does. Taking the totality of the facts and circumstances of this case into consideration as also the judicial opinion, we are of the considered view that penalty Under Section 271(1)(c) is not justified in this case. The same is accordingly cancelled.