This appeal by the revenue and cross-objection by the assessee for the assessment year 1990-91 are directed against the order of the Commissioner (Appeals) deleting penalty of Rs. 59,400 levied under section 271(1)(c) of the Act.
The facts of the case are that the assessee filed return of income for assessment year 1990-91 on 31-10-1990, declaring income of Rs. 57,500.
The return contained the following note "That the assessee had made certain purchases on credit basis during the year under consideration and the profit of such transactions could not be returned alongwith the book profits due to non-accessabihty to such transactions. As the statutory period for filing the return is expiring and in order to file the return in time the assessee is filing the return and the same shall be revised at the earliest.
The assessee thereafter revised the return on 20-2-1991, in which additional income of Rs. 1,10,000 was declared. The assessing officer while making assessment made another ad hoc addition of Rs. 50,000 apart from the amount surrendered by the assessee. He also initiated penalty proceedings under section 271(1)(c) of the Act but subsequently dropped the same.
The above referred to additional income of Rs. 1,10,000 was not entered in the books of account relevant to assessment year 1990-91 but said sum was credited to personal account of the assessee on 26-2-1992.
Having regard to above entry and on his interpretation of Expln. 2 to section 271(1)(c), the assessing officer reinitiated penalty proceedings under section 271(1)(c) of the Act. The show-cause notice was served on the assessee on 12-4-1993. The assessee submitted his reply dated 27-9-1993, which is reproduced in the penalty order. The assessing officer did not accept the claim of the assessee and vide order dated 30-9-1993, levied penalty of Rs. 59,400 by invoking Expln.
2 to section 2710)(c) of the Act.
On appeal, the learned Commissioner (Appeals) cancelled the levy with the following observations "2. It has again been stressed before me by the appellant's counsel that this is not a case where the amount has been added as such by the assessing officer. The appellant was actually in possession of sum of Rs. 1,10,000 which had been returned voluntarily in the revised return and even if there were no supporting documents filed with it the amount represented actual income of the said year. It had been assessed as such. This sum did not represent addition made to the total income and in fact no addition has been made by the assessing officer. It is true that the sum of Rs. 50,000 had been added but this has not been credited to the appellants personal account subsequently. What had been credited was only the sum of Rs. 1,10,000 and this represented the appellant's own income declared voluntarily.
3. I have considered this matter and the plain reading of the Expln. 2 to section 271(1)(c) would show that the views of the appellant's counsel are correct. The said explanation comes into operation where the source of any receipt, deposit, outgoing or investment in any assessment year is sought to be explained by the assessee to be the amount which was added in computing the income or deducted in computing the loss for any earlier assessment year or years but in respect of which no penalty had been levied. As it is a fact that this amount was neither added to the income or deducted from the loss of the appellant for the earlier assessment year, no penalty under section 271(1)(c) could be levied. Hence, the penalty levied would stand deleted and the appellant would be entitled to relief of Rs. 59,400.
The revenue has brought the issue in appeal and reliance has again been placed on Expln, 2 to section 271(1)(c) of the Act to justify the levy of penalty. It is stated that on account of deposit of Rs. 1, 10, 000 in personal account of assessee on 26-2-1992, the above amount has to be treated as income, particulars of which were concealed or inaccurate particulars of which were furnished in the year where the amount was added. It would be appropriate to reproduce the said Explanation which is as under "Expln. 2 : Where the source of any receipt, deposit, outgoing or investment in any assessment year is claimed by any person to be an amount which had *been added in computing'the income or deducted in computing the loss in the assessment of such, person for any earlier assessment year or years but in respect of which no penalty under clause (iii) of this sub-section had been levied, that part of the amount so added or deducted in such earlier assessment year immediately preceding the year in which the receipt, deposit, outgoing or investment appears (such earlier assessment year hereafter in this Explanation referred to as the first preceding year) which is sufficient to cover the amount represented by such receipt, deposit or outgoing or value of such investment (such amount or value hereafter in this Explanation referred to as the utilised amount) shall be treated as the income of the assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished for the first preceding year; and where the amount so added or deducted in the first preceding year is not sufficient to cover the utihsed amount, that part of the amount so added or deducted in the year immediately preceding the first preceding year which is sufficient to cover such part of the utilised amount as is not so covered shall be treated to be the income of the assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished for the immediately preceding first preceding year and so on, until the entire utilised amount is covered by the amount so added or deducted in such earlier assessment year." It is clear from above Explanation that any receipt, deposit, outgoing or investment can be treated as income concealed or income in respect of which inaccurate particulars were furnished of the year in which addition of amount utilised for receipt, deposit, outgoing etc. was made. The Explanation raises a presumption of concealment of income or furnishing of inaccurate particulars of income. The Explanation is applicable in cases where tangible or intangible addition is made but there is no sufficient proof to levy penalty. The said proof is furnished by the assessee by crediting amount and by admitting that income added was in fact earned by the assessee. In such circumstances, Explanation helps to establish concealment of income or furnishing of inaccurate particulars of income to justify the levy of penalty.
The aforesaid Explanation has no application to the facts and the circumstances of the present case. The assessee never disputed that sum of Rs. 1,10,000 was assessee's income for assessment year 1990-91.- The said sum was disclosed in the revised return. The assessing officer also considered the question of levy of penalty under section 271(1)(c) of the Act. After considering the Explanation of the assessee, the penalty proceedings were dropped on merit. Proceedings were not dropped because sum of Rs. 1,10,000 was not credited in books of account or was not utilised. The amount having been returned and,accepted as income, there was no doubt or dispute on its existence. The penalty could not be levied as it was voluntarily surrendered and this claim of the assessee was accepted. Now, there is nothing in the Explanation to revive a case of levy of penalty after it is dropped on merit. The Explanation which was accepted at the time ot dropping of first penalty proceedings was still valid and acceptable. Expln. 2 referred to above had nothing to do with the dropped proceedings. Having dropped the penalty once, there is no machinery in the Explanation to revive the levy. The assessee through out accepted that sum of Rs. 1,10,000 was income earned on certain transaction of business. Whether the said sum was credited or kept outside the books of account was immaterial. The mere fact that it was credited on 26-2-1992, did not change the situation. I am, therefore, of the view that Expln. 2 was not applicable to the facts and circumstances of the case. The said Explanation is applicable where the assessee does not accept certain additions as income but later on and in the subsequent years wishes to take benefit of the addition by showing utilisation of the added amount in the shape of some receipt, deposit etc. For the above reasons, I concur with the order of the Commissioner (Appeals) cancelling the levy.
The cross-objection of the assessee merely to support the order of the Commissioner (Appeals) is held to be unmaintainable and is dismissed.