1. This appeal by the revenue is directed against order dated 25-4-1991 passed by CIT(A), deleting penalty of Rs. 81,082 levied under section 271(1)(c) by the Assessing Officer for assessment year 1987-88.
2. The assessee, an individual, filed a return of income on 27-10-1989, showing an income of Rs. 24,630, which was revised on 29-11-1989, declaring an income of Rs. 1,25,463, vide assessment framed under section 143(3) on 4-12-1989. Search under section 132 was carried on 16-5-1986 at the residential premises of Sh. Om Parkash, husband of the assessee, during which, cash amounting to Rs. 2,45,995 was found. As per balance-sheet for the year ended 31-3-1986, cash available with the assessee was to the tune of 1,45,163. Difference of Rs. 1,00,833 was surrendered by the assessee 'for buying peace', which amount was added to the income from undisclosed sources. Penalty proceedings were thereafter initiated under section 271(1)(c) read with Explanation 5(2) and, after giving an opportunity of being heard, Assessing Officer levied the impugned penalty.
"I have considered the rival submissions. The penalty has been levied under section 271(1)(c), read with Explanation 5(2). The provisions of Explanation 5(2) to section 271(1)(c) are not applicable in the present case because it is an admitted fact that no search warrant was issued in the name of the appellant and no Panchnama was drawn in her name. As stated by ld. ITO in the impugned order, 'the difference of Rs. 1,00,833 was surrendered by the assessee for buying peace'. Accordingly, it is clear that no concealment has been detected by ld. ITO. Reference is invited to the judgment of Pb. & Hr. High Court in the case of Gumani Ram Siri Ram v. CIT [1972] 85 ITR 67. In this case, their Lordships were considering the issue of penalty, as to whether the surrender was a proof of concealment. It was held that an assessee could surrender for hundred and one reasons and not necessarily that there was concealment and that mere surrender could not lead to the proof of concealment.
2.5 In the light of the above discussion, I hold that there is no justification for the impugned penalty. The same is accordingly deleted." 4. Ld. D.R. relied on the order of the Assessing Officer and urged for restoration of impugned penalty. Ld. counsel, on the other hand, relied on the impugned order of first appellate authority and urged for confirmation of the same.
5. We have heard the rival contentions and gone through the record and perused the statement of the assessee recorded before and after the unlocking of the portion of the house at the time of search, which was backed by the husband of the assessee, Sh. Om Parkash, who was one of the sons of Sh. Bhagwan Dass. The cash found and seized, which remained unexplained and was denied being owned by the husband of the assessee and was, later on, surrendered with the stipulation to buy peace. The Assessing Officer in the penalty order has observed as under :- "... I have carefully considered the submission of the assessee and found no force in it. The authorised officer, during the course of search, examined the assessee and her husband, about source of cash found. The husband of the assessee in his statement dated 16-5-1986 said, 'I do not know from where this cash has come'. The assessee in the revised return has surrendered the difference of cash in order to purchase peace. Since the assessee and her husband could not adduce any evidence regarding acquisition of cash found and the assessee has herself surrendered the amount for taxation, it is clear that the assessee has concealed the particulars of income, which has been disclosed by her after the search operations. Under the circumstances, I hold that the penalty provisions under section 271(1)(c), read with Explanation 5, are clearly attracted.
Accordingly, penalty under section 271(1) is levied ...." We are, therefore, of the opinion that concealment gets clearly established and it is not a case of mere surrender but conscious concealment, as there is clear contradiction in the two statements of the assessee and nothing has been proved to establish the source of unexplained cash found at the time of search and seized. Mere surrender 'to buy peace' would not absolve the assessee from levy of penalty until or unless concrete material or evidence is brought on record to rebut the charge. Legal plea taken by the assessee is also of no help, in view of facts and circumstances of the case. Accordingly, we are of the view that ld. first appellate authority ought not have deleted the impugned penalty. His order is, therefore, reversed and that of the Assessing Officer levying penalty is restored.
1. I have very carefully gone through the proposed order of my ld.brother dated 27-5-1997 wherein he has reversed the order of the ld.CIT(A) deleting the penalty of Rs. 81,082 levied by the Assessing Officer under section 271(1)(c) for assessment year 1987-88, thereby restoring the order of the Assessing Officer imposing the penalty, but I am unable to agree with the reasoning as well as conclusion arrived at.
2. Briefly the facts are that the assessee Smt. Lajwanti Devi w/o Shri Om Parkash, an individual, filed a return of income on 27-10-1989 showing an income of Rs. 24,630 which was revised on 29-11-1989 disclosing an income of Rs. 1,25,463. The total income assessed amounted to Rs. 1,25,463 vide assessment framed under section 143(3) on 4-12-1989.
3. A search and seizure operation under section 132 was carried on, on 16-5-1996 at the residential premises of Shri Om Parkash, husband of the assessee, in a portion of the house belonging to Shri Bhagwan Dass, father of Shri Om Parkash. A statement of Smt. Lajwanti Devi was recorded on 16-5-1986 under section 132(4) at the beginning of the search wherein she stated that Shri Bhagwan Dass HUF owned a residential house at Sunami Gate, Sangrur, in which she, alongwith her husband Shri Om Parkash, owned a part, being the son of Bhagwan Dass.
She stated that they occupied two rooms on the ground floor to the back of the house and two rooms on the first floor. She admitted that a petti(trunk) was lying in the room used by Shri Bhagwan Dass which was locked. She specifically stated that beyond these places, she and her husband did not occupy any portion in the house belonging to Shri Bhagwan Dass. She further stated that the box lying in Bhagwan Dass's room was given to her on marriage and it contained household goods and cash given to her at the time of birth of her sons and daughters from time to time and her personal savings were of the order of Rs. 25,000 or Rs. 30,000.
4. A further statement of Smt. Lajwanti Devi was recorded on the same day i.e., 16-5-1986 at the close of the search wherein the Assessing Officer put a specific question as under :- "An amount of Rs. 7,45,995 has been found in cash from your part of the house. This amount is in form of bundles of Rs. 100, Rs. 50, Rs. 5 currency notes some bundles of Rs. 100 are in S. No. and some bundles carry date stamps which shows that these notes have been issued from the bank during the last two or three years. In your previous statement you said that the amount lying in your premises had come to you as gifts from parents or accrued as personal savings out of household expenses. The form in which the amount has been discovered shows that it has not been lying with you for long nor does it seem to be meant for house expenses in which case it is usually in the form of miscellaneous currency notes. It goes to prove that the amount is neither a gift from your parents or savings from house expenses. What do you want to say in this regard ?" "I got some currency notes exchanged from my husband for the marriage of my daughter. The statement about the sources of this amount as given previously is the correct one. The above written statement is correct to the best of my knowledge." 5. It may be pointed out that the assessee alongwith her husband late Shri Om Parkash, were not normally residing in the house belonging to Shri Bhagwan Dass and in fact they were residing at their own house situated at Club Road, Sangrur. It appears that the search warrant was issued only in the name of Shri Om Parkash and it was not in the name of Smt. Lajwanti Devi, the assessee. The Assessing Officer while passing the assessment order in her case on 4-12-1989 has observed that the cash available with the assessee as on 31-3-1986 as per balance-sheet was Rs. 1,45,162 against which cash found from the assessee was Rs. 2,45,995. Thus there was a difference of Rs. 1,00,833 which was surrendered by the assessee in the revised return filed on 29-11-1989 "for buying peace". The assessee while filing the revised return stated that her husband was not keeping good health and was suffering from Cancer and ultimately expired on 22-12-1987. She herself was under medical observation and in September 1987 while undertreatment at Dayanand Medical College and Hospital, Ludhiana, it was detected that she was also suffering from Cancer and it was under these circumstances, to avoid long drawn litigation, she surrendered the difference of cash actually found from the premises of Shri Bhagwan Dass in rooms in the occupation/possession of the assessee and the cash available as per balance-sheet. The Assessing Officer completed the assessment at Rs. 1,26,463 including the amount of Rs. 1,00,833 as surrendered in the revised return and also initiated penalty proceedings under section 271(1)(c), read with Explanation 5(b)(2) holding that the assessee was deemed to have concealed the particulars of income as the income had been disclosed in the revised return of income after the search operation under section 132.
6. The Assessing Officer, after issuing the show-cause notice under section 271(1)(c), levied a penalty of Rs. 81,082 which is the maximum leviable under the provisions of section 271(1)(c) by invoking Explanation 5(b)(2) to section 271(1)(c) after rejecting the explanation of the assessee that the Explanation to section 271(1)(c) was not attracted in the case of the assessee because no search warrant was issued in the name of the assessee. The Assessing Officer observed that the authorised officer during the course of the search had asked her husband about the source of cash found and the husband specifically stated that "I do not know from where this cash has come". The Assessing Officer held that since the assessee and her husband could not produce any evidence regarding the acquisition of cash found and the assessee had herself surrendered the amount for taxation, it is clear that the assessee had concealed the particular of income which had been disclosed by her after the search operation. The Assessing Officer accordingly levied the maximum penalty of Rs. 81,082. The assessee appealed and the ld. CIT(A) held that the provisions of Explanation 5(b)(2) to section 271(1)(c) were not applicable in the present case because admittedly no search warrant was issued in the name of the assessee and no panchnama was drawn in her name.
Accordingly the ld. CIT(A) held that the difference of Rs. 1,00,833 was surrendered by the assessee for buying peace and as such no concealment was detected by the Assessing Officer. The learned CIT(A) relying on the decision of the Punjab and Haryana High Court in the case of Gumani Ram Siri Ram v. CIT [1972] 85 ITR 67-70 held that no penalty was leviable because an assessee could surrender for hundred and one reasons and not necessarily that there was concealment and that mere surrender could not lead to the proof of concealment.
7. Aggrieved with the order of the ld. CIT(A), the Revenue filed appeal which according to my ld. brother is required to be allowed in terms of his proposed order which to my mind is not justified in the facts and circumstances of the case narrated above and my reasoning for that is as under.
8. Admittedly, Explanation 5(b)(2) to section 271(1)(c) is not applicable in this case as no search warrant was issued in the name of the assessee nor any panchnama was prepared in her name. The Assessing Officer while levying the penalty has not specifically invoked any other Explanation, namely, Explanations 1 to 4 to section 271(1)(c) at the time of initiation of proceedings nor he has referred to any of the Explanations 1 to 4 to section 271(1)(c) at the time of levy of penalty. As such, the question of levy of penalty has to be adjudicated on the interpretation of substantive provisions of section 271(1)(c) as held by the Hon'ble Bombay High Court in the cases of CIT v. P. M. Shah [1993] 203 ITR 792 and CIT v. Dharamchand L. Shah [1993] 204 ITR 462/70 Taxman 414.
9. The fact that the assessee has surrendered the amount of Rs. 1,00,833 with a view to buy peace on account of the death of her late husband by Cancer and herself also being diagnosed as suffering from Cancer, will not be sufficient to hold the assessee guilty of concealment of income as held by the Hon'ble Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705/33 Taxman 460A wherein it is held at page 706 (Head Notes) that from the assessee agreeing to additions to his income, it does not follow that the amount agreed to be added was concealed income. There may be a hundred one reasons for such admission, i.e., when the assessee realises the true position, it does not dispute certain disallowances, that does not absolve the Revenue from proving the mens rea of quasi-criminal offence. Keeping in view the totality of the facts and circumstances of the case, I am of the considered opinion that, if the assessee has, in her endeavour to buy peace, after the death of her husband by Cancer and herself suffering from the same dreaded disease, offered for taxation an amount of Rs. 1,00,833 which was the excess cash found from her petti (trunk), she has suffered taxation and she should not be further penalised by holding her guilty of conscious and deliberate concealment. Accordingly I will uphold the order of the ld.CIT(A) in deleting the maximum penalty levied by the Assessing Officer under section 271(1)(c).
10. Before parting, I may observe that the Hon'ble Bombay High Court in the case of R. R. Gavit v. Smt. Sherbanoo Hasan Daya [1986] 161 ITR 793/28 Taxman 349 has held that power to interrogate on oath conferred by section 132(4) of the Income-tax Act, is not for the purpose of general investigation of the assets, but for the limited purpose of seeking an explanation or information in respect of documents, articles or things found during the search. Since the preliminary statement of the assessee was recorded before the commencement of search, it is not a statement under section 132(4) in terms of the Bombay High Court judgment referred to supra and also in view of the fact that no warrant of authorisation was issued in the name of the assessee. As regards the second statement at the close of the search is concerned, the assessee explained that she got some currency notes exchanged from her husband for the marriage of her daughter and the amount found belonged to her and was accumulated over the years on account of gifts and savings. The conclusion of my ld. brother that there is clear contradiction in the two statements of the assessee and nothing has been proved to establish the source of unexplained cash found at the time of search and seizure, is not factually correct as the assessee did give an explanation about the cash found, part of which, even according to the ITO, was as per the balance-sheet of the assessee as on 31-3-1986 amounting to Rs. 1,45,162. About the balance cash, the explanation was that it was accumulated over the years on account of savings from household expenses or gifts received by her from friends and relatives on festive occasions and births of two sons and a daughter spread over a long period of time. Further my ld. brother in the proposed order while upholding the levy of penalty by the Assessing Officer has held that "mere surrender 'to buy peace' would not absolve the assessee from levy of penalty until or unless concrete material or evidence is brought on record to rebut the charge". From the above it appears that my ld.brother is of the view that in penalty proceedings, the onus is on the assessee to prove that he has not concealed the income or furnished inaccurate particulars of income.
However, in a case where the penalty is levied under the substantive provisions of section 271(1)(c) corresponding to section 28(1)(c) of the Income-tax Act, 1922, it has been authoritatively held in the case of CIT v. Anwar Ali [1970] 76 ITR 696 (SC), that it was for the department to prove a guilty mind before it penalises a citizen for concealment of income. It was only with a view to overcome the difficulties caused by the Anwar Ali's case (supra) that Explanations were added below section 271(1)(c) initially by the Finance Act, 1964 and thereafter by various amendments whereby to a case where Explanation applied, the onus was shifted towards the assessee instead of the department. However, in a case where the penalty is levied with reference to the substantive provisions of section 271(1)(c), the ratio of Anwar Ali's case (supra) still holds the field and since in the present case, the department has not brought any material on record to prove a guilty mind of the assessee, levy of penalty by the Assessing Officer could not be sustained and was rightly deleted by the ld.CIT(A). Accordingly I uphold the order of the ld. CIT(A).
On a difference of opinion between the Members who heard this appeal, the following point of difference is referred to the Hon'ble President for the opinion of the Third Member :- "Whether, on the facts and in the circumstances of the case, the order of the ld. CIT(A) deleting the penalty of Rs. 81,082 levied by the Assessing Officer under section 271(1)(c) should be reversed and that of the Assessing Officer restored as held by the Judicial Member or the order of the ld. CIT(A) be upheld as held by the Accountant Member ?" 1. There being a difference of opinion between the Members constituting the Division Bench, the Hon'ble President has referred the following point of difference to me for disposal under section 255(4) of the Income-tax Act, 1961 :- "Whether, on the facts and in the circumstances of the case, the order of the ld. CIT(A) deleting the penalty of Rs. 81,082 levied by the Assessing Officer under section 271(1)(c) should be reversed and that of the Assessing Officer restored as held by the Judicial Member or the order of the ld. CIT(A) be upheld as held by the Accountant Member ?" 2. The facts of the case briefly stated are that search operations were conducted by the Income-tax Department under section 132 on May 16, 1986 on the residential premises of the assessee at Club Road, Sangrur.
The assessee lived with her husband Shri Om Parkash in this house and the warrant of authorisation was issued in the name of the assessee's husband. Another warrant of authorisation was issued against Shri Bhagwan Dass, father-in-law of the assessee, for searching the residential premises at Sunami Gate, Sangrur.
The assessee's husband, late Shri Om Parkash, was one of the sons of Shri Bhagwan Dass. However, he did not reside with his father in this house, though, some portion of the residential house at Sunami Gate, Sangrur was under the control of Shri Om Parkash and the same was found locked during the search operations. The assessee was called upon to unlock the said portion which was duly complied with. The statement of the assessee was recorded before commencing the search of the residential portion in the Sunami Gate house. A sum of Rs. 2,45,995 was found in cash during the search operation in the portion occupied by Shri Om Parkash. The Assessing Officer treated an amount of Rs. 1,45,162 as explained on the basis of assessee's balance-sheet found during the search showing cash balance as on 31st March, 1986 at Rs. 1,45,162. With regard to the cash found during the search, the assessee in her statement dated 16-5-1986, recorded before the commencement of the search, stated that "the cash lying here was either received by me from my parents as gift or is a part of my savings. My father gave me Rs. 4,000 on the birth of my eldest son 25 years ago as chuchak. Four years after this another amount of Rs. 5,000 was received from my father on the birth of second son and another amount of about Rs. 6,000, Rs. 7,000 was received as chuchak from my father two years later on the birth of my daughter. My personal savings in this portion of the house is about Rs. 25,000 or Rs. 30,000. My father died about 15 years ago, after this my brother Sh. Raghunath Dass kept on giving me some money, on festival days. The amount lying in our premises has not come from any other source than my personal savings and gifts from parents.
May be five or ten thousand rupees have come from my husband, the rest of the amount is absolutely mine. No one has any share in it. This amount includes nothing given to me as loan or kept with me in trust".
3. Another statement of the assessee was recorded immediately after the conclusion of the search which is to the following effect :- "Q. An amount of Rs. 2,45,995 has been found in cash from your part of the house. This amount is in form of bundles of Rs. 100, Rs. 50, Rs. 5 currency notes same bundles of Rs. 100 are in S. No. and some bundles carry date stamps which shows that these notes have been issued from the bank during the last two or three years. In your previous statement you said that the amount lying in your premises had come to you as gift from parents or accrued as personal savings out of house/household expenses. Four/Five thousand rupees have been given by your husband for house expenses. The form in which the amount has been discovered shows that it has not been lying with you for long nor does it seem it to be meant for house expenses in which case it is usually in the form of miscellaneous currency notes. It goes to prove that the amount is neither a gift from your parents or savings from house expenses. What do you want to say in this regard I got some currency notes exchanged from my husband for the marriage of my daughter. The statement about the sources of this amount as given previously is the correct one." 4. The assessee filed the return of income for assessment year 1987-88 on 27th October, 1989 disclosing total income of Rs. 24,630 which comprised 1/4th share of rent from shop-cum-flat No. 19, Sector-26, Chandigarh as well as interest on National Savings Certificates. The assessee filed a revised return on 29-11-1989 showing total income of Rs. 1,25,463 which included, inter alia, an amount of Rs. 1,00,833 being the difference between the cash found in the assessee's portion and the cash in hand as reflected in the balance sheet as on 31st March, 1986. The revised return is accompanied with a covering letter dated 29-11-1989 explaining the circumstances for surrendering the amount of Rs. 1,00,833 by the assessee. The relevant portion of the letter reads as under :- "Due to the search operation at the house of my husband I was in a very confused state of mind. I was also not maintaining good health as F.O.A. had been detected which ultimately lead to an operation in September 1987 in Daya Nand Medical College and Hospital, Ludhiana when it was also detected that I am suffering from cancer too. My husband was also not keeping in good health, he too suffered from cancer and ultimately expired on December 22, 1987.
That I have not been able to recover from the agony of the death of my husband. I am also suffering from cancer and I am not in a position to draw into a long drawn litigation. I am a housewife and am also illiterate.
The return of income and the statement of affairs accompanied with the return for the assessment year would reveal that I was possessed of a cash of Rs. 1,45,162.52p on March 31, 1986. This leaves an amount of Rs. 1,00,833 which is to be explained by me.
In order to avoid litigation and with a view to purchase peace of mind a revised return is submitted declaring a sum of Rs. 1,00,833 being the difference of cash found on 16-5-1986." 5. The Assessing Officer made the assessment vide order dated 4-12-1989 initiating penalty proceedings under section 271(1)(c) invoking Explanation 5 thereto. The Assessing Officer proceeded to levy penalty of Rs. 81,882 under section 271(1)(c) by invoking Explanation 5 on 27-6-1990. The CIT(A) cancelled the penalty holding that Explanation 5 to section 271(1)(c) does not apply since no warrant of authorisation had been issued in the name of the assessee and no Panchnama was drawn in her name. The CIT(A) further held that mere surrender by the assessee for "buying peace" would not amount to proof of concealment.
While deleting the penalty, the CIT(A) placed reliance on the decision of Punjab and Haryana High Court in the case of Gumani Ram Siri Ram (supra) at p. 70.
6. The ld. Judicial Member, while reversing the order of the CIT(A), held that conscious concealment has been established in the instant case since the two statements of the assessee recorded on 16-5-1986 are contradictory and nothing has been proved to establish the source of unexplained cash found at the time of search. The ld. Judicial Member further held that mere surrender to buy peace would not absolve the assessee from levy of penalty until or unless the concrete material or evidence is brought on record to rebut the charge. With regard to the applicability of Explanation 5 to section 271(1)(c), the ld. Judicial Member held that the legal plea does not help the assessee in view of facts and circumstances of the case. Without specifically invoking Explanation 1 to section 271(1)(c), it appears that the ld. Judicial Member proceeded on the basis of the premise that the onus lay upon the assessee to prove the source of unexplained cash of Rs. 1,00,833 found during the search.
7. The ld. Accountant Member in his dissenting order held that since no search warrant had been issued in the name of the assessee nor any Panchnama was prepared in her name. Explanation 5 to section 271(1)(c) would not apply. The ld. Accountant Member further observed that since the Assessing Officer while levying the penalty has not specifically invoked any other Explanation, namely, Explanations 1 to 4 to section 271(1)(c), nor he has referred to an of the said Explanations while levying the penalty, the question of levy of penalty has to be adjudicated on the interpretation of substantive provisions of section 271(1)(c). In support of this view, reliance has been placed on the decisions of the Bombay High Court in the cases of P. M. Shah (supra) and Dharamchand L. Shah (supra). The ld. A.M. further held that since the surrender has been made by the assessee with a view to buy peace and keeping in view the adverse personal circumstances of the assessee on account of death of her husband by cancer and the assessee herself being diagnosed as suffering from cancer, it cannot be said that the amount agreed to be added represented concealed income of the assessee.
Reliance has been placed on the decision of the Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. (supra).
8. Before me the ld. counsel for the assessee reiterated the submissions made before the Division Bench and argued that Explanations 1 and 5 to section 271(1)(c) are not applicable in the instant case and the issue of exigibility of penalty has to be adjudicated on the basis of the main substantive provisions of section 271(1)(c). The ld.Departmental Representative, on the other hand, argued that Explanation 5 is clearly applicable in the instant case and penalty levied under section 271(1)(c) is liable to be confirmed. Supporting the proposed order of the ld. Judicial Member, ld. D.R. argued that once the amount on account of difference in cash has been surrendered by the assessee, concealment is established and penalty under section 271(1)(c) is therefore leviable.
9. I have heard the ld. counsel for the assessee as well as the ld.D.R. and perused the material on record. I have also gone through the orders of the ld. Members. The applicability of Explanation 5 apparently forms the bedrock of department's case in support of penalty under section 271(1)(c) levied in the instant case. The ld. Judicial Member regrettably has not touched upon the vital issue whether Explanation 5 is applicable in assessee's case or not, though he has made a passing reference that legal plea is of no help to the assessee.
Explanation 5 added by the Taxation Laws (Amendment) Act, 1984 w.e.f.
1st October, 1984 enlarges the ambit of section 271(1)(c) bringing within its sweep a new category of default for inflicting penalty for concealment under section 271(1)(c).
The newly inserted Explanation 5 enacts deeming provision and has application to a situation where in the course of a search under section 132 the assessee is found to be the owner of any unexplained asset and the assessee claims that such asset has been acquired by him by utilising, wholly or in part his income for any previous year which has already ended before the date of the search or which is to end on or after the date of the search. In such a situation notwithstanding the fact that such income is declared by him in any return of income furnished on or after the date of the search, he shall for the purposes of section 271(1)(c) be deemed to have concealed his income. It is well-settled that in penalty proceedings, the norms applicable are founded on criminal law. It is a cardinal principle of interpretation of statutes that penal statutes are to be construed and applied strictly. Explanation 5 would be applicable only in cases where assessee has been subjected to search operation under section 132.
Assumption of jurisdiction under section 132 by the CIT is founded on statutory conditions as stipulated under section 132(1). Issue of warrant of authorisation under section 132(1) against an assessee leads to the search operations at the premises specified in the warrant and culminates in the seizure of, inter alia, unexplained assets, if any, and drawing up of the Panchnama in respect thereof. Search under section 132 on the assessee's premises is thus the basic statutory requirement for invoking the deeming fiction contained under Explanation 5 to section 271(1)(c). In the instant case, the facts are undisputed and which are to the effect that no search warrant has been issued in the name of the assessee and there was thus no occasion for execution of any such warrant issued in her name. The cash has been recovered from a portion of the house occupied by her husband Shri Om Parkash during the course of search of the said house on the basis of a warrant authorisation issued against Shri Bhagwan Dass, father-in-law of the assessee. It was Shri Bhagwan Dass who lived in the Sunami Gate house along with his sons other than Shri Om Parkash. Shri Om Parkash, husband of the assessee, lived separately at Club Road, Sangrur and separate warrant of authorisation was issued in the name of Shri Om Parkash for search of his house at Club Road, Sangrur. Since the basic requirement incorporated under Explanation 5 has not been fulfilled in the instant case, I am inclined to concur with the view of the ld.Accountant Member that Explanation 5 is not applicable in the instant case.
10. As regards the applicability of Explanation 1 to section 271(1)(c), the ld. Accountant Member, relying upon two decisions of the Bombay High Court in the cases of P. M. Shah (supra) and Dharamchand L. Shah (supra), has held that since the Assessing Officer has not specifically invoked Explanation 1, the issue of exigibility under section 271(1)(c) would have to be adjudicated with reference to the main substantive provisions of section 271(1)(c). However, the Punjab and Haryana High Court has taken a contrary view in the two decisions in CIT v.Rajeshwar Singh [1986] 162 ITR 173/26 Taxman 439 and CIT v. Simco Auto India [1989] 179 ITR 265/[1990] 49 Taxman 270. In view of the binding decisions of the Hon'ble jurisdictional High Court, I am unable to subscribe to the view taken by the ld. Accountant Member and hold that Explanation 1 to section 271(1)(c) can be invoked for the first time before the Tribunal in support of the penalty under section 271(1)(c).
It would therefore be necessary to examine the issue of exigibility of penalty in the light of Explanation 1 to section 271(1)(c).
11. Explanation 1 has been added by the Taxation Laws (Amendment) Act, 1975 w.e.f. April 1, 1976. The Explanation consists of two clauses, namely, clauses (A) and (B). Clause (A) provides that the assessee fails to offer an explanation or offers an explanation which is found to be false. Clause (B) provides for the situation where the assessee is not able to substantiate the explanation and fails to prove that the explanation is bona fide. In the situations envisaged by the aforesaid clauses, deeming fiction would come into play and the amount added in the total income would be deemed to represent the income in respect of which particulars have been concealed.
12. The aforesaid Explanation introduced w.e.f. 1-4-1976 enacts a rule of evidence which has the effect of shifting the burden of proof on the assessee and the principles laid down in Anwar Ali's case (supra) would obviously not be applicable with full force. However, it has to be borne in mind that the introduction of Explanation does not alter the intrinsic character of penalty proceedings being quasi-criminal in nature. It is a cardinal rule of interpretation of statutes that penal proceedings are to be strictly construed. The burden of proof, which prior to 1-4-1964 lay upon the Department, shifted to the assessee by virtue of the deeming fiction introduced by the Explanation. It is well-settled that the degree of proof required for proving a negative fact would not be as heavy as required for proving a positive fact. In the case of proving a negative fact, the test of preponderance of probabilities would apply. If the assessee is able to furnish a bona fide and plausible explanation in respect of material facts, the burden cast by the Explanation would be discharged and the case would not be hit by the mischief of the said Explanation.
13. The words used in clause (A) of Explanation 1 "found to be false" expressly imports an element of deceitful intent. The word "false" in its juristic sense implies something more than a mere untruth. Untruth is simply a statement which is not true and may have been uttered without intention to deceive and through ignorance. However, falsehood necessarily denotes the violation of truth for purposes of deceit.
Merely because the explanation furnished by the assessee is considered satisfactory or unreasonable would not ipso facto justify the invocation of Clause (A) to levy penalty under section 271(1)(c).
14. Applying the aforesaid principles to the facts of the instant case, I am of the considered opinion that the case of the assessee is not hit by the mischief of Explanation 1 and, therefore, penalty levied under section 271(1)(c) cannot be sustained. The assessee in her statement dated 16-5-1986, recorded before the commencement of search of Shri Bhagwan Dass' house, furnished an explanation with regard to the difference of cash amounting to Rs. 1,00,833 as being out of gifts from her parents as well as accumulated savings. The relevant portion of the statement has already been reproduced hereinbefore. The explanation furnished by the assessee on the spur of the moment appears to be bona fide and reasonable. Applying the test of preponderance of probabitities, it can be safely inferred that the onus cast upon the assessee by Explanation 1 has been discharged. There is nothing on record to infer that the explanation of the assessee is false. The mere fact that the assessee surrendered the amount of Rs. 1,00,833 by filing a revised return with an express stipulation that the return is being filed to avoid litigation and with a view to "purchase peace of mind" would not amount to admission of concealment by the assessee. The decision of Hon'ble Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. (supra) and that of Hon'ble Punjab and Haryana High Court in the case of Gumani Ram Siri Ram (supra), cited by the ld.Accountant Member, fully supports the view taken by me here. The adverse personal circumstances of the assessee involving the unfortunate demise of her husband due to cancer and the assessee herself being a patient of cancer amply explains the anxiety of the assessee to avoid protracted litigation with the department. There is, therefore, no justification for drawing an inference that the assessee has admitted concealment of income. Having regard to the totality of the facts and circumstances of the case, I have no hesitation in holding that the case of the assessee is not hit by the mischief of Explanation 1 to section 271(1)(c). In the circumstances, no penalty under section 271(1)(c) would be leviable for assessment year 1987-88 under appeal. The view of the ld. Accountant Member is, therefore, confirmed.
15. The matter would now go back to the Division Bench for passing an order in accordance with the majority opinion.