1. This is an appeal filed by the assessee against confirmation by the CIT(A) of levy of a penalty of Rs. 2,11,39,972 under Section 271 (1)(c) of the Income-tax Act, 1961, for concealment.
2. The assessee is a registered firm carrying on business of 'Indigenous Bankers' since 1960. The business consisted of taking deposits from the public as well as advancing loans to the public.
During the accounting year relevant to assessment year 1985-86, the firm had 180 branches spread over the States of Gujarat, Rajasthan, Maharashtra and Madhya Pradesh besides its Head Office at Bombay.
3. The assessee was following the calendar year as its previous year.
Thus, the previous year for assessment year 1985-86 ended on 31st December, 1984. During this calendar year, certain amendments were brought about in the Reserve Bank of India Act, 1934, by introduction of Section 45S therein, with effect from 15th February, 1984. According to this newly introduced section, no firm shall, at any time, have deposits from more than 25 depositors per partner, or, 250 depositors in all, excluding in either case depositors who were relatives of any of the partners. In case the deposits held by the firm were not in accordance with the above, then it was provided that before the expiry of a period of two years from the date of such commencement, the firm would repay such all the deposits as are necessary for bringing the number of depositors within the relative limits specified in that Sub-Section. This amendment was introduced by Section 10 of Banking Laws (Amendment) Act, 1983. The business of the assessee was affected adversely very severely by the new law effective from 15th February, 1984.
4. The assessee filed return of income on 30th October, 1985 declaring a total loss of Rs. 6,80,84,980. Subsequently, a revised return was filed on 22nd February, 1988 declaring a loss of Rs. 6,84,70,200. The Assessing Officer passed an assessment order on 20th February, 1989 computing the total income on a positive figure of Rs. 14,32,05,200.
Penalty proceedings were also initiated under Section 271(1)(c) of the Act.
5. The additions made in the assessment order included, inter alia, an addition of Rs. 5,71,98,216 on account of unexplained cash credits under Section 68 of the Act, with which we are concerned. The Assessing Officer found that the assessee had shown deposits received from various parties under the following six heads: 6. The Assessing Officer asked for the details of deposits received and names and addresses of the parties concerned but the assessee expressed its difficulty saying that the names were numerous and most of the branches were on the point of closure. The Assessing Officer observed that the deposits were essentially credits which had to be explained satisfactorily. The explanation included identification/existence of the party concerned, genuineness of the transaction and capacity of the party to make the deposit. Since the assessee had not furnished the above evidence, he held that the cash credits were not satisfactorily explained, as required under Section 68 of the Act. He did not have the details regarding the fresh deposits taken during the year. In the circumstances, he compared the balances outstanding as on 31st December, 1983 and 31st December, 1984, under each head of deposit scheme. Such a comparison revealed that the deposits had increased under the following heads during the year:Name of the Deposit Balance as on Balance as on Difference 31-12-1983 31-12-1984 4,51,693(i) Sulaxmi Deposit 8,00,69,394 8,05,21,087 Certificate(ii) Cumulative Fixed 16,10,38,054 21,77,84,577 5,67,46,523 Deposit Total: Rs. 5,71,98,216 7. In view of the above, the Assessing Officer held that an amount of Rs. 5,71,98,216 was income from undisclosed sources and added the same to assessee's income. Penalty proceedings under Section 271(1)(c) of the Act were also initiated.
8. In the course of hearing of appeal before the CIT(A), it was submitted on behalf of the assessee that the details of the fresh deposits could not be furnished since there were about 180 branches in various States and due to financial difficulties, most of the branches were on the verge of closure. The assessee was doing business of accepting deposits from various depositors ranging from Rs. 500 to Rs. 5,000 and, it was stated that in earlier years, no such addition on account of unexplained cash credits had been made. It was claimed that the assessee was having sufficient proof to show the genuineness of the deposits. In view of the above, the CIT(A) restored the matter to the file of the Assessing Officer with a direction to allow the assessee an opportunity to produce evidence to show the genuineness of the cash credits. The order of the CIT(A) was passed on 2nd March, 1990.
9. The Assessing Officer passed an order giving effect, to the order of the CIT(A) on 30th July, 1990. Some figures were reconciled by the assessee in the course of opportunity given by him and it was also ascertained that a part of the addition consisted of addition due to interest only. After allowing some relief, the Assessing Officer retained an addition of Rs. 3,42,01,523. Since the firm could not give any satisfactory explanation nor any evidence regarding increase in deposits to this extent.
10. The assessee did not file any second appeal before the Tribunal against the order of the CIT(A). The addition of Rs. 3,42,01,523, therefore, became final.
11. The Assessing Officer had issued a notice to show cause why penalty should not be levied under Section 271(1)(c) of the Act separately. In the course of those proceedings, it was submitted by the assessee's counsel that in penalty proceedings, the Assessing Officer must have additional material, which was not there in the present case and, therefore, no penalty could be levied. Reliance was placed on the decision of the Supreme Court in the case of Jain Bros. v. Union of India [1970] 77ITR107. However, the Assessing Officer distinguished the above decision by saying that there had been an amendment to Section 271 (1)(c) of the Act, after the above judgment had been delivered and, the onus could not be shifted on the department thereafter in the above manner.
12. It was also submitted that penalty could not be levied because the finally assessed figure was a loss and not a positive income. Reliance was placed on certain decisions of the Tribunal, to which we will refer subsequently. However, the Assessing Officer did not accept the contention in view of the decision of the Kerala High Court in the case of CIT v. India Sea Foods [1976] 105 ITR 708. He finally held that the assessee had concealed the particulars of its income and also furnished inaccurate particulars and levied a penalty under Section 271(1)(c) of the Act, amounting to Rs. 2,11,39,972 equal to 100 percent of the tax on concealed income of Rs. 3,42,01,523.
13. The CIT(A) noted that it had been explained to the Assessing Officer that the total deposits in the various schemes had come down to Rs. 59,37,50,216 as on 31st December, 1984 from Rs. 68,55,42,527 as on 31st December, 1983 and this went to show that the assessee had not accepted any fresh deposits during the accounting year 1984. It was also submitted to the Assessing Officer that as per the amendment brought by the Banking Laws (Amendment) Act, 1983, effective from 1st January, 1984 (sic), the assessee was debarred from receiving deposits from more than 250 persons and in case the deposits were from more than 250 persons, the assessee was required to reduce the number of depositors within a period of two years. The same argument was reiterated before the CIT(A).
14. It was further submitted that there were huge losses in the past, in the current year and also in subsequent years and, therefore, there was no motive for tax evasion.
15. An alternative submissiori was also given stating that since the finally assessed figure was a loss, the question of penalty did not arise. Reliance was placed on the following three decisions of the Tribunal in support of this contention: (i) ITAT Bombay Bench's decision in the case of Mutual Plastics v. Twelfth ITO [IT Appeal No. 2965 (Bom.) of 1985, dated 28-7-1989], (ii) ITAT Ahmedabad Bench's decision in the case of Shri Khedut Sahakari Khand Udyog Mandal Ltd. v. ITO [ITAppeal No. 2180 (Ahd.) of 1988, dated 19-10-1989], and (iii) ITATAmritsar Bench's decision in the case of Victory P.H.M. Transport Co. (P.) Ltd. v. ITO [1986] 17 ITD 857.
16. Reliance was also placed on the decision of the Punjab & Haryana High Court in the case of CIT v. Prithipal Singh & Co. [1990] 183 ITR 17. Lastly, attention was invited to Board's Circular No. F.No.284/4/75-IT (Inv.), dated 16th October, 1975, where directions were issued to the Income-tax Officers for not initiating penalty proceedings under Section 271(1)(c) of the Act in certain types of cases.
18. The CIT(A) held that on merits, the assessee had failed to furnish any evidence in discharge of the onus resting on it to explain the increase in deposits to the extent of Rs. 3,42,01,523. Adequate opportunity had been allowed for this purpose. But the assessee had offered an explanation which it was not able to substantiate and, also failed to prove that such explanation was bona fide and that all the facts relating to the same and material to the computation of its total income had been disclosed. In other words, the CIT(A) held that the assessee was deemed to have concealed the income under Explanation 1 to Section 271(1)(c) of the Act.
19. The CIT(A) held further that penalty was leviable even in a case where the finally assessed income was a loss, relying on the language of Explanation 4 below Section 271(1)(c) of the Act and the decision of the Kerala High Court in the case of India Sea Foods (supra). The CIT(A) also relied on the decision of the Supreme Court in the case of Raghuvanshi MULs Ltd. v. CIT [1952] 22 ITR 484 where it was held that the word "income" includes not only those things which Section 2(24) of the Act declares that it shall include but also such things as the word signifies according to its natural import. According to him, it followed from the charging provisions of the Act that the word "income" included losses also. He referred also to the decision of the Supreme Court in the case of CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 where it was held that loss is a negative profit and both positive and negative profits are of revenue character.
20. Finally, the CIT(A) referred to the directions of the CBDT dated 16th October, 1975. Directions had been given therein that the ITO should not initiate proceedings for imposition of penalty qnder Section 271(1)(c) of the Act, where the return of income had been filed declaring total income on a positive figure but not exceeding the maximum amount which is not chargeable to income-tax. He observed that the orders relate to initiation of penalty proceedings and not to their completion. In the present case, when the first assessment order was passed, the income was computed on a positive figure exceeding the taxable limit and, therefore, the initiation of penalty proceedings was in order.
21. For the above reasons, the CIT(A) upheld the levy of penalty under Section 271(1)(c) of the Act. The assessee is aggrieved by this order and is now in appeal before us.
22. The learned Counsel for the assessee has raised before us also the preliminary issue, whether penalty is leviable in law under Section 271(1)(c) of the Act, where the returned income as well as the finally assessed income were losses. We shall deal with this preliminary issue first. Reliance has been placed on the following decisions of the Tribunal: (i) 5 - Star Galvanizers v. Asstt. CIT [IT Appeal No. 5919 (Bom.) of 1989, dated 1-1-1990], relating to assessment year 1983-84; (ii) Shri Khedut Sahakari Khand Udyog Mandal Ltd's case (supra), relating to assessment year 1980-81 and (iii) Mutual Plastics' case (supra), relating to assessment year 1979-80.
23. Reliance has also been placed on the decision of the Punjab & Haryana High Court in the case of Prithipal Singh & Co. (supra).
24. In the above cases, it was held that no penalty was leviable under Section 27l(1)(c) of the Act, where the finally assessed figure was a loss. We shall analyse these cases presently.
25. The learned Departmental Representative, on the other hand, relied on the decision of the Tribunal of Allahabad Bench in the case of Omrao Industrial Corpn. (P.) Ltd. v. ITO [1990] 35 ITD 42, relating to assessment year 1972-73, where it was held that penalty was leviable even where the finally assessed income was a loss. The learned Departmental Represen-tative also relied on the decision of the Supreme Court in the case of CIT v. J.H. Gotla [1985] 156ITR 323', where it was held that "income" includes loss insofar as Section 16(3)(a) of the Indian Income-tax Act, 1922 was concerned, which corresponds to Section 64 of the 1961 Act. Further, he relied on the decision of the Supreme Court in the case of Harprasad & Co. (P.) Ltd. (supra) where it was held that "income" includes loss. We shall analyse these cases also presently.
26. After careful perusal of the case laws cited by both sides, we find that the matter can be appreciated properly only when the changes in law relating to levy of penalty from time to time are noticed. The various decisions should then be related to the law as it existed at the relevant time.
27. The following chart gives a comparative account of the relevant partsSection 28(1) of the Indian Income- Section 271(1) of the Income-taxAct,tax Act, 1922 1961 Section 28(1) of the Indian IncomSection 28(1): If the Income-tax Section 271(1): If the Income-taxOfficer, the Appellate Assistant Officer, or the Appellate AssistantCommissioner or the Appellate Tri- Commissioner in the course of anybunal, in the course of any proceed- proceedings under this Act, is satis-ings under this Act, is satisfied that fled that any person, any person-(a]...
(a)...(b)...
(b)...(c) has concealed the particulars of (c) has concealed the particulars ofhis income or deliberately furnished his income or furnished inaccurateinaccurate particulars of such in- particulars of such income,come,Section 28(1) of the Indian Income- Section 271(1) of the Income-taxAct,tax Act, 1922 1961 (i)...he, or it may direct that such person (iii) in the cases referred to in clauseshall pay by way of penalty... in the (c), in addition to any tax payable bycases referred to in clauses (b) and him. A sum which shall not be less(c), in addition to any tax payable by than twenty per cent but whichhim, a sum not exceeding one and a shall not exceed one and a halfhalf times the amount of the income-tax times the amount of the tax, if any,and super-tax, if any, which would have which would have been avoided ifbeen avoided if the income as returned the income as returned by suchby such person had been accepted as the person had been accepted as thecorrect income.
correct income.
From 1-4-1968 to 1-3-1976 Sub-Cla 28. It will be seen from the above chart that under the Indian Income-tax Act, 1922, as well as under the 1961 Act, up to 31-3-1968, the imposition of penalty under Section 28 (1)(c) /271 (1)(c) was tax-based and the measure of the penalty was the tax, if any, which would havebeen avoided. However, with effect from 1 st April, 1968, the quantification of penalty was delinked from the tax, if any, which would have been avoided and, instead, the penalty was linked with the quantum of income concealed. Again, with effect from 1st April, 1976, the measure of penalty has become "tax sought to be evaded" and the above phrase has been defined by Clause (a) of Explanation 4 below Section 271(l)(c) of the Act, introduced simultaneously with effect from 1st April, 1976, as under: Explanation 4: For the purposes of clause (iii) of this sub-section, the expression 'the amount of tax sought to be evaded',- (a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income assessed, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; 29. We will now take up the decisions of the Tribunal, relied upon by the learned Counsel for the assessee. In the case of 5-Star Galvanizers (supra), the Bombay Bench of the Tribunal was concerned with assessment year 1983-84 and, therefore, the law as amended with effect from 1st April, 1976. The Tribunal gave a finding that no penalty was leviable where the finally assessed figure was a loss, relying on an earlier decision of Bombay Bench in the case of Mutual Plastics (supra) for assessment year 1979-80. In that decision, reliance was placed on the decision of Amritsar Bench of the Tribunal in the case of Victory P.H.M. Transport Co. (P.) Ltd. (supra), which had, in turn, relied upon the judgment of the Madhya Pradesh High Court in the case of CITv.Jaora Oil Mill [ 1981 ] 129 ITR 423'. However, the Amritsar Bench of the Tribunal was dealing with assessment year 1973-74, when Explanation 4, below Section 271(1)(c), of the Act, was not in existence. The Madhya Pradesh High Court was also dealing with assessment year 1968-69 when Explanation 4 was not in existence. These cases are, therefore, distinguishable and could not have been relied upon.
30. The next decision is that of the Ahmedabad Bench of the Tribunal in the case of Shri Khedut Sahakari Khand Udyog Mandal Ltd. (supra).
Although they were dealing with assessment year 1980-81, reliance was placed on the judgment of the Madras High Court in the case of Addl.
CIT v. Murugan Timber Depot [1978] 113 ITR 99, which dealt with the law as it existed prior to 1-4-1968. They have also relied on the judgment of the Madhya Pradesh High Court in the case of Jaora Oil Mill (supra) and, we have already seen that that decision was concerned with the assessment year 1968-69, when Explanation 4, below Section 271(1)(c) of the Act was not in existence. Thus, the cases relied upon were really distinguishable if the changes in law were kept,in view.
31. The next case relied upon is the decision of the Bombay Bench of the Tribunal in Mutual Plastics case (supra). Here, the Tribunal was concerned with the assessment year 1979-80 but relied on the earlier law, as we have already discussed.
32. Reliance has also been placed on the judgment of the Punjab & Haryana High Court in the case of Prithipal Singh & Co. (supra). Here, the assessment year concerned was assessment year 1970-71 when Explanation 4, below Section 271 (1 )(c) was not in existence. However, Explanations 3 and 4 were also taken into account in the following words: Penalty imposed is paid in addition to the tax payable. When there is no tax payable, the question of any penalty does not arise. In fact, evasion of tax is the sine qua non for imposition of penalty.
Clause (iii) deals with cases referred to in clause (c) Under Sub-Section (1) of Section 271 of the Act and it clearly provides therein that the penalty or further sum payable by a person would be in addition to any tax payable by him. Explanations 3 and 4 annexed to the said provision of law also presuppose taxable income with regard to the assessment year in question. If there is no taxable income or tax assessed for payment during a particular year, the question of evasion and consequently penalty do not arise.
33. The law that applied to assessment year 1970-71 was not the law as it stood after its amendment with effect from 1st April, 1976, but the law as it stood from 1st April, 1968 to 31st March, 1976. It has been observed in the case of Omroo Industrial Corpn. (P.) Ltd. (supra) at p.
56 that unfortunately, their Lordships were given a wrong book wherein they noted Section 271(1)(iii) as amended by Finance Act, 1976, with effect, from 1-4-1976 and the Explanations 3 and 4 annexed thereto.
Because of this, the above observations were made and, therefore, the judgment could not be an authority in support of the assessee's case.
34. It is quite evident that a difficulty has arisen in the above cases since the changes in the law, from time to time, were not brought to the notice of the Tribunal, or the High Court. However, such changes in law were noticed in great detail by the Tribunal in the case of Omrao Industrial Corpn. (P.) Ltd. (supra), relied upon by the learned Departmental Representative. In this decision the Tribunal was concerned with assessment year 1972-73 and, therefore, the law as it stood from 1st April, 1968 to 31st March, 1976, but has also discussed the implications of the law as it stood subsequently from 1st April, 1976 onwards.
35. Referring to the sub-clause (iii) of Section 271(1) from 1st April, 1968 to 31st March, 1976, the Tribunal observed that it could be readily seen from its plain language that the imposition of penalty was delinked from tax avoided and, therefore, it was no more relevant for the purpose of quantification of penalty, whether any tax would have been avoided by the assessee if the returned income had been accepted.
The change in law could not be negatived by treating the preceding phrase "in addition to any tax payable" by the assessee as governing the operation of the entire Clause. This part of the clause merely drew attention to the fact that penalty would be in addition to the tax payable by an assessee and the function was nothing more. Therefore, even if the tax payable by the assessee was nil, penalty may still be imposed on the assessee, if there is concealed income.
36. Dealing with the law effective from 1st April, 1976, it was observed that the Legislature was aware that there would be situations where even though income had been concealed by an assessee, there might be no tax payable on the finally determined income and, in such a case, the amount of tax sought to be evaded by reason of concealment would naturally be nil. Apparently, the Legislature did not want this situation to re-emerge and, so it brought Explanation 4, below Section 271(1)(c) of the Act, giving the meaning to the expression "the amount of tax sought to be evaded". By virtue of Clause (a), of Explanation 4, in case of total income beingassessed at a loss, the penalty would have to be worked out on a hypothetical basis, taking the concealed income itself as the total income for that limited purpose and working out the tax thereon.
37. The learned Departmental Representative has further relied on the decision of the Kerala High Court in the case of India Sea Foods (supra). The assessment year under consideration there was the assessment year 1968-69, i.e. the law with effect from 1st April, 1968 to 31st March, 1976. In the said case, the argument on behalf of the assessee that the intention of the Parliament was that the quantification of penalty should be with reference to the assessee's total income assessed was turned down. The amended provisions of law with effect from 1st April, 1968 were noticed. In fact, the amended provisions with effect from 1st April, 1976 and the enactment of Explanation 4 were also noticed, after observing that the amended provisions would not be applicable to the present case. It was held that Clause (a) of Explanation 4 "makes it clear beyond doubt" that in using the words "the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished", what is intended to be referred to by the Parliament is not "the total income assessed". This substantiated the correctness of the interpretation of the provisions, as they existed prior to the amendment with effect from 1st April, 1976. Thus, this judgment takes into account the amended provisions with effect from 1st April, 1976 also, and the changes in law had been fully noticed.
38. The learned Departmental Representative has also relied on two decisions of the Supreme Court. In the case of J.H. Gotla (supra), it was held that the word "income" includes loss in connection with Section 16(3)(a) of the Indian Income-tax Act, 1922, corresponding to Section 64 of the 1961 Act. The learned Counsel for the assessee has submitted before us that this decision should be confined to the interpretation of Section 16(3) of the Indian Income-tax Act, 1922.
However, in the second case, Harprasad & Co. (P.) Ltd. (supra), it was held that profits and gains represent "plus income" where losses represent "minus income" and this was derived from the charging provisions of the Act. This decision, therefore, supports the case of the revenue. We also find that in none of the cases discussed earlier, this case was brought to the notice of the Tribunal, or, the High Court.
39. Considering the changes in law from time to time and the analysis of the decisions above, we must come to the conclusion that as far as the law as it existed from 1 st April, 1976 is concerned, keeping in view Explanation 4(a). below Section 271(1)(c) of the Act, penalty can be levied under Section 271 (1 )(c) even in a case where the returned income and the finally assessed income are losses. The preliminary objection of the assessee is, therefore, rejected.
40. The learned Counsel for the assessee has raised another preliminary objection which will be discussed now- Reliance has been placed on CBDTs order F.No. 284/4/75-IT (Inv.), dated 16th October, 1975. It is claimed that instructions were issued by the CBDT under Section 119(2)(a) of the Act to the ITOs saying that no proceedings for penalty under Section 271(1)(c) of the Act should be initiated in certain cases and the assessee's case is one of them. The learned Departmental Representative has opposed this contention relying on the order of the CIT(A) on the same issue, to which we have already referred.
41. We have considered the rival submissions. In order to appreciate the issue, the relevant order of the CBDT is being reproduced below: 714. Direction to ITO for not initiating penalty proceedings Under Clause (c), Sub-Section (1) in certain circumstances - Order under Section 1. In exercise of the powers conferred by clause (a) of Sub-Section (2) of Section 119 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby directs that the ITO shall not initiate any proceedings for imposition of a penalty Under Clause (c) of Sub-Section (1) of Section 271 of the said Act in respect of any assessment year in case where - (a) the return of income has been filed declaring total income at a positive figure but not exceeding the maximum amount which is not chargeable to income-tax; (b) the consequent assessment is also finalised on total income which does not exceed the maximum amount not chargeable to income-tax; and (c) the return of income does not involve set off of losses carried forward.
2. This order shall come into force on the 1st day of November, 1975.
42. It is seen that the instructions apply to those returns of income which were filed declaring a total income at a positive figure but not exceeding the maximum amount which is not chargeable to income-tax, and the finally assessed figure also does not exceed the maximum amount not chargeable to income-tax. Firstly, it does not refer to cases where the returned income is a loss and does not refer to those cases where the finally assessed income is also a loss. The circumstances under which the CBDTs order is applicable are such that the possible addition to the income cannot exceed the maximum amount chargeable to income-tax and, no tax is found due. Thus, these directions are applicable to cases of small additions only. They do not contemplate huge additions like the addition of Rs. 3,42,01,523, as in the present case.
43. It is also seen that in the present case, the income assessed at the first stage exceeded the maximum amount which is not chargeable to tax, being positive income of Rs. 14,32,05,200. It is, therefore, obvious that the CBDTs directions meant for small assessees and small additions, are not applicable to the large addition in the present case. The directions are applicable only to initiation of penalty proceedings and not to their completion. Once the proceedings were correctly initiated, there is no bar to their completion later on. For these reasons, the second preliminary objection of the assessee is rejected.
44. We now come to the merits of the case. The learned Counsel for the assessee invited our attention to the details of deposits in various accounts as on 31st December, 1983 and 31st December, 1984 in the paper book, which are being extracted below:Name of the account Head Office Branches TotalFixed & RecurringDeposit Scheme 12,79,318 34,31,42,620 34,44,21,938Current & SavingsScheme 1,71,788 7,93,37,606 8,00,69,394Cumulative DepositScheme 1,41,982 16,08,96,072 16,10,38,054 Total: 68,55,42,527Deposit Scheme 8,44,677 21,98,78,094 22,07,22,771Current & SavingsDeposit Scheme 2,79,488 7,44,42,293 7,47,21,781Sulaxmi DepositScheme 1,84,840 8,03,36,248 8,05,21,088Cumulative DepositScheme 1,70,427 21,76,14,151 21,77,84,578 Total: 59,37,50,218 45. It was submitted that the total in the four deposit schemes had come down from Rs. 68,55,42,527 to only Rs. 59,37,50,218 and, this clearly showed that no fresh deposits had been accepted during the previous year relevant to the assessment year 1985-86. Our attention was also invited to the Banking Laws (Amendment) Act, 1983, already referred to by us earlier, according to which the assessee was debarred from receiving fresh deposits with effect from 1st February, 1984, where the deposits were more than 250 in number. In assessee's case, the number exceeded 250 very much.
46. It was next submitted that the Assessing Officer had considered these schemes selectively and only concentrated on the increase in balances in Sulaxmi Deposit Scheme and Cumulative Deposit Scheme, the total increase in these two schemes being Rs. 5,71,98,216. The Assessing Officer had ignored the decrease in the deposits over a much higher amount in the other two deposit schemes. However, the increase in the two schemes was only on account of the fact that the depositors had transferred from deposits in the first two schemes to the last two schemes since the interest paid in the last two schemes was higher. In view of this, it was submitted that the increase in deposits in the two schemes had been adequately explained.
47. Continuing his argument, the learned Counsel for the assessee submitted that a question would naturally arise why the assessee did not contest the addition in second appeal before the Tribunal. In this connection, our attention was invited to a chart in the paper book showing returned and assessed loss/income from assessment years 1982-83 to 1987-88. The returned loss varied from about R&. 2.49 crore to about Rs. 6.85 crore whereas the assessed loss/income, after giving effect to appellate order, varied from Rs. 0.98 crore to about Rs. 3.29 crore, upto assessment year 1985-86 and the assessed income for assessment years 1986-87 and 1987-88 was nil. It was also explained that the business was closed down subsequently because of the regulations contained in the Banking Laws (Amendment) Act, 1983. In the light of this, it was submitted that there was no particular benefit in pursuing the quantum appeal since the benefit of carried forward losses would not be available in later years due to closure of the business.
According to the learned Counsel for the assessee, this was the real reason why no second appeal was filed before the Tribunal as far as quantum was concerned.
48. It was further submitted that there was no possible motive to enhance the loss in the return since in any case, the finally assessed figure was also a loss and no benefit of carried forward would be available.
49. Lastly, it was submitted that the number of accounts in each scheme was huge and collection of information required by the Assessing Officer was not possible in a short time, available to the assessee. In other words, proper opportunity was not allowed for proving the genuineness of the increase in credits. For these reasons, it was submitted that the penalty should be cancelled.
50. The learned Departmental Representative, on the other hand, relying on the order of the CIT(A), emphasised that sufficient opportunity had been allowed for proving the genuineness of the increase in credits. In this connection, he submitted that lack of opportunity, if any, at the original assessment stage, had been made good by the CIT(A) by setting aside the matter and restoring it to the Assessing Officer on the plea of the assessee that sufficient opportunity had not been allowed. In the circumstances, the plea of inadequate opportunity was not acceptable.
51. The learned Departmental Representative further submitted that far from producing any confirmatory letters from the depositors where there were increase in deposits, the assessee had not even supplied their names and addresses. According to him, each deposit scheme was separate and distinct and the fact that there was decrease in two schemes could not automatically lead to a conclusion that those deposits had been transferred to the two remaining schemes. In other words, it was not at all sufficient to show that the overall deposits in the four schemes had declined in the course of the year.
52. The learned Departmental Representative relied on the decision of the Bombay High Court in the case of Lata Mangeshkar v. CIT [1973] 88 ITR 336 and the decision of the Supreme Court in the case of Roshan Di Hatti v. CIT [1977] 107 ITR 938 in support of his contention that the assessee's onus had not been discharged.
53. It was next submitted that the fact that the assessee had not filed a second appeal in quantum amounted to a surrender of the amounts and, in such cases, no further onus was there on the revenue for levy of penally under Section 271(1)(c) of the Act. Reliance was also placed on the decision of the Bombay High Court in thecase of Western Automobiles (India} v. CIT [ 1978] 112 ITR 1048 and that of the Madras High Court in the case of H.V. Venugopal Chettiar v. CIT [1985] 153 ITR 376, 23 Taxman 412..
54. Lastly, the learned Departmental Representative submitted that it was not any longer necessary to prove mens rea for penalty for concealment after the introduction of Explanation below Section 271(1)(c) of the Act and reliance in this connection was placed on the judgment of the Patna High Court in Addl CIT v. Bihar State Co-operative Marketing Union Ltd. [ 1987] 163 ITR 450 and that of the Calcutta High Court in V.P. Samtani v. CIT [1983] 140 ITR 693. 1982 9 Taxman 184.
55. We have considered the rival submissions carefully. In our opinion, this is not a case of surrender of an addition by the assessee because the addition was contested in first appeal and the assessee has given a plausible reason for not filing second appeal. We will proceed accordingly.
56. In the case of Lata Mangeshkar (supra), an amount of Rs. 95,000 was found in the accounts of the assessee. The assessee claimed that the amount represented loans taken from some persons. She was, however, not able to prove that the loan transactions were real. In this connection, it was observed that if a person comes and says that he paid a certain amount to the assessee, it is not enough that he says so but it must be shown from where the money actually came, ie., the source (page 346 of 88 ITR). In the present case, the assessee's case is even worse. None came forward to say that the deposits belonged to them and the assessee was not even able to give the names and addresses of the persons.
57. In the case of Rosnan Di Haiti (supra), it was held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Both these judgments support the department's contention. We find further that both these judgments were delivered with reference to Indian Income-tax Act, 1922 which did not have any provision corresponding to Section 68 of the Income-tax Act, 1961. According to this Section 68, which applies to the case before us, where any sum is found credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof, or the explanation offered by him is not found satisfactory, the sum so credited may be charged to income-tax, as the income of the assessee of that previous year. The onus of giving satisfactory explanation regarding the nature and source is, therefore, clearly on the assessee in regard to the quantum of addition.
58. Coming to the penalty proceedings under consideration, we have to consider Explanation 1 below Section 271(1)(c) of the Act. According to Clause (B) thereof, where in respect of any facts material to the computation of total income, the assessee 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 purpose of Section 271(1)(c), be deemed to represent the income in respect of which particulars have been concealed. There was a proviso at the relevant time below the Explanation, according to which, the Explanation would not be applicable to a case in respect of any amount added as a result of the rejection of any explanation offered by such person if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him. The CIT(A) has found that clause (B) of Explanation 1, is applicable in the present case and the assessee is not saved by the proviso. We agree with this conclusion. The explanation that the increase in the deposits in the two schemes came out of the decrease in deposits in the other two schemes could not be substantiated for want of the names and addresses of the persons concerned. No link could be established between the two sets of schemes. Further, the proviso is not applicable since all the facts relating to the issue and material to the computation of total income were not disclosed inasmuch as, even the list of persons with names and addresses where the deposits had been increased could not be given. We, therefore, hold that on merits also, penalty was leviable under Section 271(1)(c) r.w. Explanation 1, The penalty levied is already the minimum leviable under the Act. In the circumstances, no relief is due to the assessee. The order of the CIT(A) is confirmed.