M/s. Acid & Chemicals Co.,, Ahmedabad v. The Income tax Officer, Ward-12(2),, Ahmedabad

ITA 157/AHD/2006 | 2000-2001
Pronouncement Date: 23-04-2010 | Result: Dismissed

Appeal Details

RSA Number 15720514 RSA 2006
Assessee PAN ERTHE1922A
Bench Ahmedabad
Appeal Number ITA 157/AHD/2006
Duration Of Justice 4 year(s) 3 month(s) 5 day(s)
Appellant M/s. Acid & Chemicals Co.,, Ahmedabad
Respondent The Income tax Officer, Ward-12(2),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 23-04-2010
Date Of Final Hearing 07-04-2010
Next Hearing Date 07-04-2010
Assessment Year 2000-2001
Appeal Filed On 18-01-2006
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI T.K. SHARMA JM AND D.C.AGRAWAL AM M/S ACID & CHEMICALS CO. 31 ANANT INDUSTRIAL ESTATE NR. COMET CHEMICALS. RAKHIAL AHMEDABAD. V/S . INCOME-TAX OFFICER WARD 12(2) AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAKAR SHARMA AR RESPONDENT BY:- SHRI ANAND MOHAN SR.D.R. O R D E R PER D.C.AGRAWAL ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) IN CONFIRMING LEVY OF PENALTY. IT HAS RAISED FOLLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOL DING THE IMPOSITION OF PENALTY ON CASH CREDIT OF RS. 30 LACS SUSTAINABLE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE IMPOSITION OF PENALTY ON PAYMENT OF INTEREST OF RS. 5 48 000/- ON DEPOSITS WHICH WERE ASSESSED AS CASH CREDIT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS ON NOT CONSIDERING VARIOUS SUBMISSIONS MADE BY THE APPELLANT DURING TH E COURSE OF HEARING WITH THE LD. ITO AND DURING THE COURSE OF A PPEAL PROCEEDINGS. ITA NO.157/AHD/2006 ASST. YEAR :2000-01 2 2. THE FACTS OF THE CASE ARE THAT ASSESSMENT WAS CO MPLETED UNDER SECTION 143(3) ON 21.10.2002 ON A TOTAL INCOME OF R S.36 24 261/- AS AGAINST RETURNED INCOME OF RS.43 987/-. THE AO PROP OSED THE FOLLOWING ADDITIONS :- 1. UNEXPLAINED CASH CREDITS U/S 68 RS.30 00 000/- 2. INTEREST EXPENSES RS. 5 40 000/- 3. EXCESS DEPRECIATION RS. 40 271/- 3. THE LD. A.O. IN THE COURSE OF ASSESSMENT PROCEED INGS FOUND THAT ASSESSEE IS TRADING IN ACID AND CHEMICALS. IT HAD C REDITED DEPOSITS OF RS.30 00 000/- IN THE BOOKS OF ACCOUNTS AS ON 1.4.9 9 IN THE NAMES OF FOLLOWING FAMILY MEMBERS AS UNDER :- AMOUNT DATE OF DEPOSIT 1. BHARTIBEN JAGDISHBHAI PATEL RS.7 50 000/- 01.04. 1999 2. NEETABEN UMESHBHAI PATEL RS.7 50 000/- 01.04.199 9 3. PROVINABEN RAMESHBHAI PATEL RS.5 00 000/- 01.04. 1999 4. DIPTIBEN HASMUKHBHAI PATEL RS.5 00 000/- 01.04.1 999 5. SHARMILABEN DINESHBHAI PATEL RS.5 00 000/- 01.04 .1999 THE AO ISSUED SUMMONS TO THESE PERSONS BUT NONE OF THEM ATTENDED BEFORE THE AO AND REPLIED THAT THEIR REPRESENTATIVE IS BUSY IN FILING THE RETURNS. HOWEVER ON SUBSEQUENT OCCASION ABOVE LAD IES APPEARED BEFORE THE AO. THEIR STATEMENTS UNDER SECTION 131 WERE REC ORDED. THEY IN COMMON ACCEPTED FOLLOWING FACTS :- -THAT THE ACCOUNTING OF THE FIRM WAS HANDLED ENTIR ELY BY SHRI JAGDISH SOMBHAI PATEL PARTNER. -THAT SHRI JAGDISH SOMBHAI PATEL WAS THE ONLY PERS ON WHO COULD OFFER ANY EXPLANATION ABOUT THE CASH CREDITS. -THAT WHATEVER EXPLANATION WAS OFFERED BY HIM WOULD BE BINDING ON ALL OF THEM. 3 STATEMENT OF SHRI JAGDISH PATEL WAS ALSO RECORDED W HO ADMITTED THAT ENTIRE AMOUNT OF 30 LACS WAS UNACCOUNTED INCOME OF THE FIRM BUT EARNED DURING THE PERIOD 1987-88 TO 2000-01. THE MANNER IN WHICH SUCH INCOME WAS EARNED WAS ALSO EXPLAINED. IT WAS STATED BY SHR I JAGDISH PATEL THAT INCOME WAS EARNED ON COMMISSION BASIS. DURING THE C OURSE OF BUSINESS THE PARTNERS OF THE FIRM HAD ACTED AS MEDIATOR ON N UMBER OF OCCASIONS BETWEEN THE BUYERS AND THE SELLER AND EARNED COMMIS SION FROM SUCH DEALS. THIS WAS NOT ACCOUNTED FOR AND HE WAS UNABLE TO GIVE YEAR-WISE BIFURCATION. LD. CIT(A) CONFIRMED THE ADDITION. THE MATTER WENT TO THE TRIBUNAL WHICH VIDE ITS ORDER IN ITA NO.508/AHD/200 3 FOR ASST. YEAR 2000-01 DATED 27.8.2004 ALSO CONFIRMED THE ADDITI ON. IN THIS REGARD IT IS RELEVANT TO REFER TO PARA 7 TO 10 FROM THE ORDER OF THE TRIBUNAL AS UNDER :- 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT AS PER STATEMENT OF SHR I JAGDISH SOMABHAI PATEL THE SUM OF RS.30 LACS IS UNACCOUNTED INCOME OF THE PRECEDING YEAR. THEREFORE THE SAME CANNOT BE TAXED IN THE YEAR UND ER CONSIDERATION. HOWEVER WE FIND THAT THE REVENUE HAS NOT MADE ANY ADDITION ON THE BASIS OF STATEMENT OF SHRI JAGDISH SOMABHAI PATEL. THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS 30 LAKHS BECAUSE OF UNEXPLAINED CREDIT IN THE NAME OF FIVE CREDITORS IN THE ASSESSEE'S BOOKS OF ACCOUNTS DURING THE ACCOUNTING YEAR RELEVANT TO THE ASST. YEAR UNDER CONSIDERATION. COMING TO THE CONTENTION OF THE LD. COUNSEL THAT SINCE THE CREDIT WAS ON THE 1ST DAY OF THE ACCOUNTING YEAR S EC 68 WOULD NOT BE APPLICABLE WE FIND THAT THE HON'BLO JURISDICTIONAL HIGH COURT AS WELL AS HON'BLE APEX COURT HAVE HELD AGAINS THE ASSESSEE IN THIS RESPECT. IN THE CASE OF MANSURALI VALLBHANI DUDHANI (SUPRA) THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.72 000/- FOR UNEXPLAINED CA SH CREDITS. THE SAME WAS SUSTAINED BY THE AAC. HOWEVER THE ITAT DELETED THE ADDITION ON THE GROUND THAT THE CREDIT WAS MADE ON THE 1 ST DAY OF THE YEAR OF ACCOUNT AND THE ASSESSEE COULD NOT HAVE EARNED SO MUCH AMOUNT O N THE 1 ST DAY OF THE YEAR OF ACCOUNT. ON APPEAL BY THE REVENUE THE HON. JURISDICTIONAL HIGH COURT REVERSED THE FINDING OF THE ITAT AND HELD THA T THE SUM OF RS.72 000/- SHOWN CREDITED IN THE CAPITAL ACCOUNT I S LIABLE TO BE ADDED AS INCOME U/S 68 OF THE ACT. 4 8. THE HON'BLE APEX COURT ALSO CONSIDERED SIMILAR ARGUMENTS. IN THE CASE OF ORISSA CORPORATION P.LTD (SUPRA). AT PAGE 82 OF THE REPORTS. THEIR LORDSHIPS HAVE DISTINGUISHED THE PROVISIONS O F SEC.68 IN THE INCOME-TAX ACT 1961 WITH ITS SIMILAR PROVISION IN THE INCOME-TAX ACT 1922 AND OBSERVED AT PAGE 82 OF THE REPORTS AS UNDE R :- UNDER THE 1922 ACT WHERE A LARGE AMOUNT OF CASH W AS FOUND CREDITED ON THE VERY FIRST DAY OF THE ACCOUNTING YEAR AND CONSIDERING T HE EXTENT OF THE BUSINESS IT WAS NOT POSSIBLE THAT THE ASSESSEE EARNED A PROFIT OF THAT AMOUNT IN ONE DAY THE AMOUNT COULD NOT BE ASSESSED AS THE INCOME OF THE YEAR ON THE FI RST DAY ON WHICH IT WAS CREDITED IN THE BOOKS. UNDER THIS SECTION EVEN IN SUCH A CASE THE UNEXPLAINED CASH CREDIT MIGHT BE ASSESSED AS THE INCOME OF THE ACCOUNTING YEAR FO R WHICH THE BOOKS ARE MAINTAINED. SEE IN THIS CONNECTION THE OBSERVATION IN KANGA A ND PALKHIWALAS INCOME-TAX SEVENTH EDICITION VOLI PAGES 609 AND 610. IN VIEW OF ABOVE DECISIONS OF THE HON. APEX COURT A S WELL AS JURISDICTIONAL HIGH COURT IT IS EVIDENT THAT SEC.6 8 IS APPLICABLE EVEN WHEN THERE IS CREDIT ON THE FIRST DAY OF THE ACCOUN TING YEAR. THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE DECISI ON OF HON. JURISDICTIONAL HIGH COURT IN THE CASE OF MITESH ROL LING MILLS (P) LTD. (SUPRA) TO SUPPORT HIS CLAIM THAT ADDITION U/S 68 C ANNOT BE MADE WHEN THE CREDIT IS ON THE 1 ST DAY OF THE ACCOUNTING YEAR. HOWEVER WE FIND THAT THE FACTS IN THAT CASE WERE SLIGHTLY DIFFERENT. IN THAT CASE THERE WERE CREDITS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WAS A PRIVATE LIMITED COMPANY AND HAD NOT COMMENCED THE BUSINESS. ON THAT FACT THE HON. JURISDICTIONAL HIGH COURT REMANDED THE MATTER TO TH E TRIBUNAL FOR FRESH CONSIDERATION. THEREFORE IN THAT CASE NO LAW HAS BEEN LAID THAT IF THERE IS A CREDIT ON THE 1 ST DAY OF THE ACCOUNTING YEAR SEC.68 WILL NOT BE APPLICABLE. ON THE OTHER HAND THE HON. JURISDICTIO NAL HIGH COURT ONLY DIRECTED THE TRIBUNAL TO RE-ADJUDICATE THE MATTER C ONSIDERING THE FACT THAT WHEN THERE IS A CREDIT IN THE ASSESSEES BOOKS OF A CCOUNTS THE ASSESSEE COMPANY HAS NOT EVEN COMMENCED THE BUSINESS. THE FA CTS IN THE CASE OF THE ASSESSEE WERE ALTOGETHER DIFFERENT. THE ASSESSE E COMPANY IS ALREADY RUNNING THE BUSINESS SINCE PAST SEVERAL YEARS. THER EFORE THE ABOVE DECISION OF HON. JURISDICTIONAL HIGH COURT WOULD NO T BE OF ANY HELP TO THE ASSESSEE. 9. IT IS A SETTLED LAW THAT WHEN THERE IS A CREDIT IN THE ASSESSEES BOOKS OF ACCOUNTS THE BURDEN IS UPON THE ASSESSEE TO EST ABLISH THE IDENTITY OF THE CREDITOR THE CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION. IN THIS CASE THE ASSESSEE HAS NOT BEE N ABLE TO DISCHARGE THE ABOVE BURDEN. IN FACT WHEN THE CREDITORS APPEARED BEFORE THE AO THEY DENIED HAVING ANY KNOWLEDGE ABOUT THE CREDITS IN TH EIR NAMES. 5 THEREAFTER THE ASSESSEE HAS ALSO NOT PRODUCED ANY EVIDENCE TO ESTABLISH THAT THE AMOUNT IS ACTUALLY DEPOSITED BY THE ABOVE CREDITORS AND HAS NOT GIVEN ANY DETAILS WITH REGARD TO THE CREDITWORTHINE SS OF THE CREDITORS. THEREFORE IN THIS CASE NEITHER THE CREDITWORTHINE SS OF THE CREDITORS NOR THE GENUINENESS OF THE TRANSACTIONS HAS BEEN PROVED . 10. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER A RGUED THAT EVEN IF THE ASSESSEE IS UNABLE TO DISCHARGE THE BURDEN OF PROVI NG THE GENUINENESS OF THE CREDITS IT IS NOT NECESSARY THAT ADDITION SHOU LD BE MADE U/S 68 BECAUSE SEC.68 GIVES DISCRETION TO THE AO TO MAKE S UCH ADDITION OR NOT TO MAKE THE ADDITION BECAUSE THE WORD USED U/S 68 IS MAY AND NOT SHALL. IN SUPPORT OF THIS CONTENTION HE RELIED UPON THE D ECISION OF HON. APEX COURT IN THE CASE OF SMT. P.K. NOORJAHAN AND ALSO O F THE GAUHATI HIGH COURT IN THE CASE OF NEMI CHAND KOTHARI (SUPRA). WE FIND THAT IN THE CASE OF P.K.NOORJAHAN (SUPRA) THE FACTS WERE ALTOGETHER DIFFERENT. IN THAT CASE THE ASSESSEE WHO WAS MUSLIM LADY AGED ABOUT 2 0 YEARS AT THE RELEVANT TIME HAD PURCHASED AGRICULTURAL LAND FOR RS. 34 628/- FOR ASST. YEAR 1968-69. THE ASSESSING OFFICER ACCEPTED THE AS SESSEES EXPLANATION WITH REGARD TO SOURCE OF ABOVE INVESTMENT PARTLY AN D MADE THE ADDITION OF RS.32 628/-.WHEN THE MATTER REACHED TO THE TRIBU NAL THE ITAT DELETED THE ADDITION AND HELD THAT EVEN THOUGH THE EXPLANAT ION ABOUT THE NATURE AND SOURCE OF PURCHASE WAS NOT SATISFACTORY BUT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT WAS NOT POSSIBLE FOR THE ASSESSEE TO EARN THE AMOUNT INVESTED IN THE PROPERTY AND THAT BY NO STRE TCH OF IMAGINATION COULD THE ASSESSEE BE CREDITED WITH HAVING EARNED T HIS INCOME IN THE COURSE OF THE ASSESSMENT YEAR OR WAS EVEN IN A POSI TION TO EARN IT FOR A DECADE OR MORE. ON THE ABOVE FACTS THE HONBLE APE X COURT SUSTAINED THE ORDER OF THE TRIBUNAL AND HELD THAT THE DISCRET ION U/S.69 WAS NOT PROPERLY EXERCISED BY THE INCOME-TAX OFFICER AND TH E TRIBUNAL RIGHTLY DELETED THE ADDITION. HOWEVER THE FACTS IN APPEAL BEFORE US ARE ALTOGETHER DIFFERENT. THE ASSESSEE IS A FIRM WHICH IS IN THE BUSINESS OF ACID AND CHEMICALS SINCE SEVERAL YEARS. THERE WAS HUGE C REDIT OF RS.30 LAKHS IN THE ASSESSEES BOOKS OF ACCOUNTS IN THE NAMES OF FIVE LADIES WHO ARE WIVES OR CLOSE RELATIVES OF THE PARTNERS OF THE ASS ESSEE FIRM. THE ABOVE CREDITORS APPEARED BEFORE THE ASSESSING OFFICER AND STATED THAT THEY ARE NOT AWARE OF ANY CREDIT IN THEIR NAMES IN THE BOOKS OF ACCOUNTS AND SHRI JAGDISH SOMABHAI PATEL PARTNER OF THE FIRM WOULD B E ABLE TO EXPLAIN THE ABOVE CREDITS. WHEN THE STATEMENT OF SHRI JAGDISH S OMABHAI PATEL WAS RECORDED HE FAIRLY ADMITTED THAT IT IS UNRECORDED INCOME OF THE FIRM. OF COURSE HE CLAIMED THAT IT IS THE INCOME OF THE PAS T YEARS. HOWEVER DURING THE COURSE OF HEARING BEFORE US THE LD. COU NSEL FOR THE ASSESSEE HAS FAIRLY ADMITTED THAT DESPITE THE ABOVE STATEMEN T GIVEN BY THE PARTNER SHRI JAGDISH SOMABHAI PATEL THE ABOVE INCOME OF RS. 30 LAKHS IS NOT 6 DISCLOSED IN ANY OF THE PRECEDING YEARS. IN OUR OPI NION SEC. 68 HAS BEEN BROUGHT ON THE STATUTE BOOK TO COVER THE CASES WHER E THE ASSESSEE CREDITS HIS UNRECORDED INCOME IN HIS BOOKS OF ACCOUNTS IN T HE NAMES OF OTHERS. THEREFORE THE PRESENT CASE IS THE FITTEST CASE WHE RE SEC. 68 SHOULD BE APPLIED AND THEREFORE IN OUR OPINION HAS RIGHTLY BEEN APPLIED BY THE ASSESSING OFFICER. WE THEREFORE UPHOLD THE ADDITI ON OF RS.30 LAKHS FOR UNEXPLAINED CASH CREDITS AND REJECT GROUND NO.1 OF THE ASSESSEES APPEAL. 4. THEREAFTER THE AO PROCEEDED TO LEVY THE PENALTY. DURING THE COURSE OF PENALTY PROCEEDINGS FOLLOWING EXPLANATION WAS SU BMITTED BY THE ASSESSEE VIDE HIS LETTER DATED 18.6.2005 :- DURING THE ASSESSMENT PROCEEDINGS THE ENTIRE FACTS WERE SUBMITTED TO THE AO AND THERE WAS NOTHING WHICH WAS CONCEALED. THE DETAILED DISCUSSION OF OUR SUBMISSIONS DURING T HE ASSESSMENT AND APPELLATE PROCEEDINGS WILL REVEAL THAT IN THE STATE MENT RECORDED THE INCOME OF THE FIRM EARNED DURING LAST SEVERAL YEARS WAS ADMITTED. HOWEVER THE ADDITION HAS BEEN MADE FOR THE YEAR UN DER REFERENCE AND THERE WAS NO POSITIVE PROOF OF ANY CONCEALMENT OF I NCOME FOR THE YEAR UNDER REFERENCE NOR ANY MALA-FIDE INTENSION. THE FA CTS WERE STATED BUT ON ACCOUNT OR NOT BEING ABLE TO SATISFY THE APPEAL AUT HORITIES THE ADDITION WAS MADE FOR ASSESSMENT YEAR 2000-01 ONLY. WE SUBMIT THAT MERELY BECAUSE THE FICTION OF U/S 68 IS APPLIED AND ADDITION MADE IT COULD NOT AMOUNT TO CONCEALMENT OF INCOME OF THE YEAR. AS HELD IN CIT VS. JALARAM OIL MILLS 253 ITR 192 (G UJ) WHEREIN THE HON. HIGH COURT AFTER RELYING UPON THE SUPREME COURT DEC ISION IN P. K. NOOR JAHAN 237 ITR 570 AND EARLIER DECISION OF THE GUJAR AT HIGH COURT HAS HELD THAT EVEN IN CASE OF ADMISSION (PAGE 196 PARA 2 OF THE JUDGMENT) IT CANNOT BE SAID WITH CERTAINTY THAT THE ADMITTED AMO UNT WAS CONCEALED INCOME OF YEAR OF ADDITION. ALSO AT PARA E-F AT PAG E 197 THE HIGH COURTS HAS AGAIN REITERATED THAT DEHORS THE PROVISION OF M AKING ADDITION U/S 68 IT IS NOT POSSIBLE TO STATE WITH CERTAINTY THAT THE SAID SUM WOULD BE CONCEALED INCOME OF THE ASSESSEE FOR THE YEAR UND ER CONSIDERATION. IT WAS ALSO EMPHASIZED THAT THE DE0PARTMENT HAD TO PRO VE THAT THE AMOUNT IN QUESTION WAS ASSESSEES INCOME OF THE YEAR UNDER CONSIDERATION. 7 IT IS RESPECTFULLY SUBMITTED THAT IN VIEW OF THE AB OVE JUDGMENT AND ALSO CONSIDERING THE BONA FIDE THE ADDITION MADE BY NOT ACCEPTING THE ADMISSION IN TO DOES NOT AMOUNT TO CONCEALMENT OF I NCOME NOR ANY DELIBERATE OR MALAFIDE ATTEMPT ON THE PART OF THE F IRM. RELIANCE IS ALSO PLACED ON THE FOLLOWING CASE LAWS: - - CIT VS. HAJI GAFAR HAJI DADACHINI 169 ITR 33 (BOM) - ITO VS. DEVIBAI 84 ITD 342 (MUMBAI) IT MAY ALSO BE STATED THAT AGAINST THE CONFIRMATION OF ADDITION BY THE APPELLATE AUTHORITIES PROCEEDINGS ARE BEING PREFER RED FURTHER. TAKING OVERALL VIEW OF THE MATTER AND IN VIEW OF T HE STATEMENTS RECORDED AND THE SUBMISSION MADE EARLIER AS ALSO CONSIDERING THE BINDING FORCE OF THE ABOVE JUDGMENT WE REQUEST YOU TO PLEASE DROP T HE PENALTY PROCEEDINGS INITIATED BY YOU. THE AO CONSIDERED THE SUBMISSIONS OF THE ASSESSEE A ND REJECTED THE EXPLANATION ON THE GROUND THAT EXPLANATION OF THE A SSESSEE THAT UNACCOUNTED INCOME PERTAINING TO EARLIER YEARS WAS NOT FOUND SATISFACTORY AS ASSESSEE COULD NOT ADDUCE ANY EVIDENCE IN RESPEC T OF THE CLAIM. HE ACCORDINGLY LEVIED A PENALTY OF RS.13 78 404/- BEIN G 100% OF THE TAX SOUGHT TO BE EVADED. 5. THE LD. CIT(A) CONFIRMED THE LEVY OF PENALTY. HI S REASONINGS ARE SUMMARISED AS UNDER :- -1. SHRI JAGDISH PATEL IN HIS STATEMENT RECORDED O N 20.8.2002 HAS CLEARLY STATED THAT AMOUNT OF RS.30 LACS SHOWN IN A SST. YEAR 2000- 01 IN THE NAMES OF THE FAMILY MEMBERS IN THE BOOKS OF THE ASSESSEE WAS IN FACT INCOME EARNED BY WAY OF COMMISSION ON T RANSACTION OF SALE AND PURCHASES BETWEEN DIFFERENT PARTIES; -2. NO SPECIFIC YEAR-WISE AMOUNT WAS GIVEN; -3. SUCH INCOME WAS NOT ACCOUNTED FOR IN THE BOOKS; 8 -4. NO EVIDENCE WAS FURNISHED IN RESPECT OF YEARS I N WHICH IT WAS EARNED; -5. THE ELEMENT OF CONCEALMENT IS ESTABLISHED IN TH E PRESENT CASE; & -6. IT IS A CASE OF AUTOMATIC LEVY OF PENALTY ON TH E ADDITION OF CASH CREDIT. 6. HE ALSO CONFIRMED THE LEVY OF PENALTY IN RESPECT OF ADDITION OF RS.5 40 000/- BEING THE AMOUNT OF INTEREST DEBITED AS PAID TO THE CREDITORS. 7. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED THA T LEVY OF PENALTY IS NOT JUSTIFIED BECAUSE AMOUNT WAS CREDITED ON THE FI RST DAY OF ACCOUNTING YEAR AND ASSESSEE COMPANY COULD NOT HAVE EARNED THI S MUCH OF INCOME ON THE VERY FIRST DAY. HE SUBMITTED THAT IT IS A GOOD CASE FOR MAKING ADDITION BUT NOT FOR LEVYING PENALTY AS NO POSITIVE PROOF OF CONCEALMENT HAS BEEN FOUND. FURTHER AO HAS NOT MENTIONED ANY DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNT. THE INCOME EARNED PERTAINED TO EA RLIER YEARS AND THEREFORE CANNOT BE SAID TO BE CONCEALED INCOME OF ASST. YEAR 2000-01. FURTHER THE DEPARTMENT HAS NOT REOPENED ANY ASSESSM ENT OF EARLIER YEARS SO AS TO FIND ANY CONCEALMENT. THE LD. AR FURTHER S UBMITTED THAT STATEMENT OF SHRI JAGDISH PATEL SHOULD BE ACCEPTED AS A WHOLE. IF IT IS ACCEPTED THAT SUM OF RS.30 LACS IS UNACCOUNTED INCO ME OF ASSESSEE FIRM THEN OTHER PART OF THE STATEMENT THAT IT PERTAINED TO EARNINGS IN EARLIER YEARS SHOULD ALSO BE ACCEPTED. 8. AGAINST THIS LD. DR SUBMITTED THAT ONCE THE PAR TNER HAS ADMITTED THE SUM TO BE UNACCOUNTED INCOME NO FURTHER EVIDENC E IS REQUIRED TO BE COLLECTED. THE EXPLANATION IS NOT FOUND SATISFACTOR Y AS ASSESSEE FAILED TO PROVE THAT SUCH UNACCOUNTED INCOME PERTAINED TO EAR LIER YEARS. THE TRIBUNAL HAS CONFIRMED THE ADDITION HOLDING THAT AS SESSEE HAS FAILED TO 9 PROVE THE IDENTITY CREDITWORTHINESS AND GENUINENES S OF THE TRANSACTION. THE LD. DR REFERRED TO THE FOLLOWING DECISIONS: (1) BALWANT RAI & CO. VS. CIT (2005) 274 ITR 269 (ALL) (2) NAINU MAL HET CHAND VS. CIT (2007) 294 ITR 185 (ALL ) (3) CHUHARMAL VS. CIT (1988) 172 ITR 250 (4) CIT VS. ABOO MOHMED (2001) 250 ITR 313 ( KAR) (5) B-TEX CORPORATION VS. ITO (1993) 46 TTJ (BOM)(TM) 668 FOR THE PROPOSITION THAT WHERE ASSESSEE FAILED TO E XPLAIN THE CASH CREDITS OR FAILED TO SUBSTANTIATE EXPLANATION PENALTY CAN B E LEVIED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO REASO N FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). THE REASONS ARE THAT - THE PARTNER OF THE FIRM WHO IS MANAGING THE AFFAIRS OF THE FIRM HAS CLEARLY ADM ITTED THAT WHAT WAS INVESTED ON FIRST APRIL 1999 WAS UNACCOUNTED INCOM E OF THE FIRM. IN THIS REGARD WE REFER TO THE QUESTION-ANSWER RELIED ON BY THE AO AS UNDER :- QUESTION -4 TODAY ALL THE PARTNERS OF YOUR FIRM AN D THE LADY DEPOSITORS WHO ARE THE PARTNERS WIVES HAVE STATED ON OATH THAT THE CLARIF ICATION REGARDING DEPOSITS OF RS.30 LACS WILL BE GIVEN BY JAGDISH S. PATEL AS HE IS THE ONE WHO KNOWS ABOUT THE SAME. PLEASE EXPLAIN. ANSWER -5 IN REPLY TO THE ABOVE I HAVE TO STATE TH AT WHATEVER THE OTHER PARTNERS OF THE FIRM AND THE LADY DEPOSITORS HAVE STATED IS TRU E AND BINDING ON ME. AS REGARDS DEPOSIT OF RS.30 LACS THIS AMOUNT HAS BE EN COLLECTED BIT BY BIT AND HAS BEEN CREDITED IN THE NAMES OF THE LADY DEPOSITORS. QUESTION -6 OVER HOW MANY YEARS HAS THIS SUM BE EN COLLECTED ? ANSWER-6 MY FATHER SHRI SOMBHAI SHIVRAMBHAI PATEL W AS HANDLING THE ACCOUNTS TILL 1987 AFTER WHICH THIS RESPONSIBILITY WAS GIVEN TO ME. SINCE THEN THIS AMOUNT HAS BEEN COLLECTED BIT BY BIT. THIS SUM HAS BEEN COLLECTED OUT OF THE BUSINESS INCOME OF M/S ACIT & CHEMICALS CO. QUESTION -7 HAVE YOU MAINTAINED ANY YEAR WISE DETAI LS/ACCOUNTS OF THIS AMOUNT FOR THE PERIOD 1987 TO 2000. 10 ANSWER -7 NO. I HAVE NOT MAINTAINED ANY YEAR WISE D ETAILS/ACCOUNTS. QUESTION -8 IN REPLY TO Q.5 YOU HAVE STATED THAT TH E SUM OF RS.30 LACS HAS BEEN COLLECTED BIT BY BIT. HAS THIS BEEN ACCOUNTED FOR I N THE BOOKS OF THE FIRM? ANSWER-8 NO. THIS AMOUNT HAS NOT BEEN ACCOUNTED FOR YEAR-WISE IN THE BOOKS OF THE FIRM BUT HAS BEEN TAKEN TO THE BALANCE SHEET IN THIS YEAR. QUESTION -9 HAS THIS INCOME BEEN EARNED OUT OF PURC HASES/SALES OF ACID AND CHEMICALS CO. OR BY ANY OTHER MEANS ? PLEASE EXPLAI N THE MODUS OPERANDI. ANSWER -9 YES. THE PURCHASE AND SALE IS OF ACIDS & CHEMICALS (PRODUCTS) BUT NOT OF PURCHASE & SALE OF M/S ACID & CHEMICALS CO. WE H AVE ACTED AS MEDIATORS BETWEEN PURCHASERS AND SELLERS OF THESE P RODUCTS AND OUT OF THE DEALS FINALIZED BETWEEN SUCH THIRD PARTIES WE HAVE RECEIVED COMMISSION INCOME. THIS INCOME IS THEREFORE THE COM MISSION INCOME FROM THIRD PARTIES. QUESTION-10 ARE YOU EARNING THE ABOVE COMMISSION INCOME FROM BOTH PURCHASERS AND SELLERS ? PL EASE CLARIFY. ANSWER-10 THIS TYPE OF INCOME/COMMISSION IS USU ALLY CHARGED FROM SELLERS ONLY BUT SOMETIMES DEPENDING ON URGENCY OF THE PURCHASE RS REQUIREMENT WE EARN THE COMMISSION FROM PURCHASERS ALSO. I WISH TO EMPHASIZE THAT THERE IS NO FIXED PERCENTAGE OF SUCH COMMISSION. QUESTION-11 ARE SUCH PURCHASING AND SELLING PARTIES FROM WHOM YOU HAVE EARNED COMMISSION FIXED I.E. REGULAR? ANSWER-11 NO. SUCH PURCHASERS AND SELLERS ARE NOT F IXED. EVEN THE GOODS TRADED IN ARE NOT FIXED. ACIDS & CHEMICALS ARE OF THOUSAND VA RIETIES IN MAJORITY OF DEALINGS THE PRODUCTS TRADED IN ARE MAINLY ACIDS OR CHEMICALS AND VERY RARELY ANY OTHER ITEM. QUESTION-12`WHY HAS THE AMOUNT OF RS.30 LACS BEEN S HOWN IN THE BALANCE SHEET FOR ASST. YEAR 2 000-01ONLY. PLEASE CLARIFY. ANSWER-12 THIS AMOUNT HAD BEEN COLLECTED SINCE LONG . IN ORDER THAT THIS SHOULD NOT BE A CAUSE FOR DIFFERENCE AMONGST PARTNERS THI S AMOUNT WAS CREDITED IN THE BOOKS IN THE NAMES OF ALL FIVE PART NERS WIVES. QUESTION-16 CAN YOU GIVE THE NAMES AND ADDRESS OF A T LEAST 2 OR 3 PERSONS FROM WHO WHOM YOU HAVE EARNED THE COMMISSION INCOME? 11 ANSWER-16 I DO NOT REMEMBER ANY SUCH PARTIES. FROM THE ABOVE STATEMENT FOLLOWING THINGS ARE APPAR ENT :- (1) SUM OF RS.30 LACS IS UNACCOUNTED INCOME OF THE FIRM . (2) NO YEAR-WISE DETAILS OR ACCOUNT HAS BEEN MAINTAINED . (3) IT IS CLAIMED THAT THE SUM HAS BEEN COLLECTED OUT O F BUSINESS INCOME OF THE FIRM FROM 1987 ONWARDS. (4) THE AMOUNT IS NOT RECORDED IN THE REGULAR BOOKS. (5) THIS AMOUNT REPRESENTED COMMISSION CHARGED FROM PAR TIES FOR WHOM SALES AND PURCHASES WERE ARRANGED. (6) THE SUM OF RS.30 LACS IS NOT SHOWN IN THE BALANCE S HEET. (7) HE DOES NOT REMEMBER THE DETAILS OF PARTIES WHO HAV E PAID THIS COMMISSION INCOME. (8) THE AMOUNT WAS CREDITED IN THE BOOKS TO AVOID THE D IFFERENCES AMONG THE PARTNERS. NO DOUBT THIS MUCH OF EVIDENCE IS SUFFICIENT FOR SU STAINING THE ADDITION AS HELD BY THE TRIBUNAL IN ITS ORDER ON QUANTUM ADDITI ON AND WHICH IS REFERRED TO ABOVE BUT IT IS NOT NECESSARY THAT AO IS ALWAYS BOUND TO COLLECT FURTHER EVIDENCE OVER AND ABOVE WHAT IS USE D IN ASSESSMENT PROCEEDINGS. IT IS TO BE EXAMINED WHETHER EVIDENCE COLLECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS SUFFICIENT TO S USTAIN LEVY OF PENALTY. IF IN A CASE WHERE ADDITION IS SUSTAINED MERELY BY REJECTING THE EXPLANATION OF THE ASSESSEE THEN FOR THE PURPOSE OF LEVY OF PENALTY SUCH REJECTION OF EXPLANATION WILL NOT BE SUFFICIENT AND AO HAS TO FURTHER BRING POSITIVE MATERIAL TO SHOW THAT ADDITION REPRESENTS CONCEALED INCOME OF THE ASSESSEE OR IN RESPECT OF WHICH ASSESSEE HAS FURNIS HED INACCURATE PARTICULARS. PRIOR TO 1.4.1964 THE REQUIREMENT FOR LEVYING PENALTY WAS TO ESTABLISH MENS REA. IF AO WAS NOT ABLE TO COLLECT E VIDENCE IN RESPECT OF MENS REA OF THE ASSESSEE THEN PENALTY COULD NOT HAV E BEEN SUSTAINED. AFTER REMOVAL OF THE WORD DELIBERATE FROM THE PRO VISION OF SECTION 271(1)(C) THE MATERIAL TO ESTABLISH MENS REA WAS NO LONGER CONSIDERED NECESSARY. STILL CERTAIN COURTS HAVE HELD THAT WORD CONCEALMENT ITSELF 12 CONTAINS AN INGREDIENTS OF MENS REA AND THEREFORE TO SOME EXTENT AO IS BOUND TO COLLECT EVIDENCE TO SHOW THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. SUBSEQUENTLY AFTER 1.4.1989 EXPLANATION WAS ADDED T O THE PROVISIONS OF SECTION 271(1)(C) PROVIDING THEREIN TWO CLAUSES (A) & (B). IF PENALTY COULD NOT BE LEVIED UNDER THE MAIN PROVISION THEN I T COULD BE LEVIED UNDER EXPLANATION-1 TO SECTION 271(1)(C) IF INGREDIENTS M ENTIONED IN TERMS OF EXPLANATION ARE SATISFIED. WHEN THOSE INGREDIENTS A RE SATISFIED A DEEMING FICTION IS INVOKED FOR TREATING THE AMOUNT OF ADDIT ION AS THE AMOUNT IN RESPECT OF WHICH ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS N OT NECESSARY THAT WHILE INITIATING PENALTY PROCEEDINGS AO SHOULD SPECIFICAL LY MENTION INVOKING EITHER THE MAIN PROVISION OR EXPLANATION. IF PENALT Y IS INITIATED UNDER THE MAIN PROVISION THEN IT COULD BE LEVIED UNDER EXPLAN ATION ALSO. IT IS NOT NECESSARY THAT THERE SHOULD BE ANY SPECIFIC REFEREN CE TO THE EXPLANATION DEALING WITH DEEMED CONCEALMENT OF INCOME. WE DERIV E SUPPORT FROM THE DECISION OF HON. SUPREME COURT IN THE CASE OF K.P. MADHUSUDAN VS. CIT (2001) 251 ITR 99 (SC). IN THE PRESENT CASE PENALTY IS NOT ONLY LEVIABLE UNDER MAIN PROVISIONS BUT ALSO UNDER THE EXPLANATIO N. THEREFORE THE ARGUMENTS OF LD. AR THAT AO WAS NOT SPECIFIC IN MEN TIONING THE MAIN PROVISIONS OR THE EXPLANATION AND ON THAT GROUND PE NALTY SHOULD BE CANCELLED IS NOT SUSTAINABLE. WHEN WE APPLY THE MA IN PROVISION FOR LEVYING PENALTY THE INGREDIENTS REQUIRED TO SATISFY ARE - (1) ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME; (2) OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. WHILE FILING THE RETURN OF INCOME THE ASSESSEE HAS SHOWN THE AMOUNT OF RS.30 LACS AS CASH CREDIT OF THE LADIES IN THE FIRM AND IT ACCORDINGLY TREATED THEM AND CLAIMED INTEREST EXPENDITURE THERE ON AS A WHOLE. ON THE 13 OTHER HAND ENQUIRY CARRIED OUT BY THE AO REVEALED T HAT THE AMOUNT REPRESENTED INCOME OF THE FIRM NOT ACCOUNTED FOR. I T WAS CLEARLY FURNISHING OF INACCURATE PARTICULARS IN THE RETURN OF INCOME. NO DOUBT FOR SHOWING WHAT IS INACCURATE ONUS IS ON THE AO. HERE IT IS SHOWN THAT CORRECT FACTS ARE THAT THE CREDITS REPRESENTED UNAC COUNTED INCOME OF THE ASSESSEE AND NOT WERE ACTUALLY GENUINE CASH CREDITS . ONCE IT IS ESTABLISHED THAT RS. 30 LACS REPRESENTED UNACCOUNTED INCOME OF THE ASSESSEE THEN CHARGE LAID DOWN IN THE MAIN PROVISION IS ESTABLISH ED. THERE IS NO FURTHER DUTY CAST ON THE AO TO BRING MORE MATERIAL IN SUPPO RT OF WHAT IS FINALLY ADMITTED BY THE PARTNER OF THE FIRM. THIS STATEMENT WAS NOT CONTROVERTED/RETRACTED IN ANY OF THE PROCEEDINGS. T HE AO HAD CALLED THE LADIES PARTNERS AND RECORDED THEIR STATEMENT WHO SH OWED THEIR IGNORANCE ABOUT THE MONEY DEPOSITED IN THEIR NAMES IN THE FIR M AND REFERRED TO THE NAME OF THE MANAGING PARTNER SHRI JAGDISH PATEL. TH EREFORE IT IS NOT A CASE WHERE AO RELIED ONLY ON THE SURRENDER MADE BY THE MANAGING PARTNER BUT HE RELIED ALSO ON THE STATEMENTS OF THE CREDITORS BEING THE LADIES MEMBERS OF THE FAMILY. SINCE MONEY WAS DEPOS ITED IN CASH IN THE FIRM THERE WAS NO SCOPE OF CARRYING OUT ANY FURTHER ENQUIRY AND COLLECT MORE MATERIAL AS SOUGHT TO BE ARGUED BY THE LD. AR. WHERE MONEY IS DEPOSITED IN CASH AS CREDIT CREDITOR IS CALLED HIS /HER STATEMENT IS RECORDED AND WHEN THEY DENY ANY KNOWLEDGE OR CONNECTION WITH THE MONEY DEPOSITED IN THEIR NAMES IN THE FIRM AND THEREAFTE R MANAGING PARTNER ADMITS THE SAME AS UNDISCLOSED BUSINESS INCOME OF T HE FIRM THEN IT IS NOT A CASE OF MERE SURRENDER AND ADDITION THEREON BUT I T IS A CASE WHERE ALL POSSIBLE AVENUES OF ENQUIRIES HAVE BEEN EXPLORED BY THE AO AND THEREAFTER ADDITION HAS BEEN MADE. 10. IN BALWANT RAI & CO. VS. CIT (SUPRA) THE FACTS BEFORE HON. ALLAHABAD HIGH COURT WERE THAT AO MADE ADDITION OF RS.13 000/- BEING 14 CASH CREDIT AND IMPOSED PENALTY UNDER SECTION 271(1 )(C) BY INVOKING EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT. IT W AS HELD THAT ASSESSEE DID NOT OFFER ANY EXPLANATION REGARDING THE SOURCE OF DEPOSIT OF RS.13 000/- IN THE ASSESSMENT PROCEEDINGS OR IN PEN ALTY PROCEEDINGS. ACCORDINGLY IN VIEW OF CLAUSE (A) OF EXPLANATION-1 TO SECTION 271(1)(C) THE AMOUNT OF RS.13 000/- HAD TO BE DEEMED INCOME I N RESPECT OF WHICH PARTICULARS HAD BEEN CONCEALED BY THE ASSESSEE. 11. IN NAINU MAL HET CHAND VS. CIT (SUPRA) THE FACT S BEFORE HON. ALLAHABAD HIGH COURT WERE THAT THE DEPOSITS OF RS.1 65 000/- APPEARED IN THE NAME OF MINORS AS CASH CREDITS WHICH WAS ADDED IN THE HANDS OF ASSESSEE FIRM. THE EXPLANATION OF THE ASSESSEE WAS FOUND TO BE FALSE BY ALL THE AUTHORITIES INCLUDING THE TRIBUNAL. ON THE ISSU E OF LEVY OF PENALTY UNDER SECTION 271(1)(C) HON. ALLAHABAD HIGH COURT H ELD THAT PROFITS OF THE FIRM HAVE BEEN DIVERTED THROUGH THE DEPOSITS. T HE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE EXPLANATION TO THE EFFECT THAT DEPOSITORS HAD RECEIVED GIFTS IN ANY PREVIOUS YEAR OR HAD ANY INDE PENDENT SOURCE OF INCOME OR TO PROVE THAT EXPLANATION WAS BONA FIDE. THERE WAS NO DOCUMENTARY EVIDENCE IN SUPPORT OF THE ASSESSEES C ONTENTIONS GIVING THE NAMES OF THE PERSONS FROM WHOM ALLEGED GIFTS WERE R ECEIVED. NO SUCH EVIDENCE WAS DISCLOSED TO THE DEPARTMENT. MINOR DEP OSITORS WERE INTIMATELY RELATED TO THE PERSONS OF THE ASSESSEE F IRM. ON THIS BASIS PENALTY WAS HELD VALID. 12. IN CHUHARMAL VS. CIT (SUPRA) WATCHES OF FOREIGN MAKE VALUING RS.87 455/- WERE SEIZED BY CUSTOMS AUTHORITIES FROM THE ASSESSEES BED ROOM. NO STATEMENT WAS GIVEN BY THE ASSESSEE. SUBSE QUENT OPPORTUNITIES GRANTED WERE NOT AVAILED. HE ALSO DID NOT AVAIL PER SONAL HEARING AND OPPORTUNITY OF CROSS-EXAMINATION OF THE WITNESSES I N WHOSE PRESENCE 15 PANCHNAMA WAS PREPARED. IN THE RETURN FOR THE ASST. YEAR 1974-75 VALUE OF THOSE WATCHES WERE NOT DECLARED BY THE ASSESSEE AND THEREFORE THE SAME WAS ADDED AS ASSESSEES DEEMED INCOME UNDER SE CTION 69A. PENALTY FOR CONCEALMENT WAS ALSO LEVIED BY INVOKING THE EXP LANATION TO SECTION 271(1)(C) AS THE ASSESSEE FAILED TO DISCHARGE THE O NUS LYING ON HIM OF PROVING THAT WATCHES DID NOT BELONG TO HIM. THE HON . HIGH COURT CONFIRMED THE LEVY OF PENALTY IN APPEAL. IN FURTHER APPEAL HON. SUPREME COURT HELD THAT ONUS OF PROVING THAT ASSESSEE WAS N OT OWNER OF THE GOODS FOUND IN HIS POSSESSION WAS ON THAT PERSON AND REVE NUE AUTHORITIES CAN INVOKE THE PRINCIPLES OF EVIDENCE ACT IN THE PROCEE DINGS BEFORE THEM. UNDER THE CIRCUMSTANCES WHERE RETURNED INCOME WAS L ESS THAN 80% OF THE SEIZED INCOME PENALTY WAS LEVIABLE WITHIN THE MEAN ING OF EXPLANATION TO SECTION 271(1)(C). 13. IN CIT VS. ABOO MOHMED (SUPRA) THE FACTS BEFOR E HON. KARNATAKA HIGH COURT WERE THAT A CASH OF RS.10 51 650/- WAS S EIZED ON 1.1.86 FROM THE ASSESSEE BY CUSTOMS AND CENTRAL EXCISE AUTHORIT IES. THIS AMOUNT WAS REQUISITIONED BY THE INCOME-TAX DEPARTMENT UNDE R SECTION 132A ON 3 RD JANUARY 1986. THE ASSESSEE FILED RETURN OF INCOME ON JULY 1986 AND INCLUDING THEREIN THE SEIZED CASH. THE ADDITION WAS SUSTAINED IN APPEAL. THE AO LEVIED PENALTY UNDER SECTION 271(1)(C). EVEN THOUGH PENALTY WAS CANCELLED BY THE TRIBUNAL HON. KARNATAKA HIGH COUR T HELD THAT ASSESSEE FAILED TO PROVE THE SOURCE OF ACQUISITION OF THAT M ONEY AND ULTIMATELY HAD OFFERED THE AMOUNT FOR TAXATION. 14. B-TEX CORPORATION VS. ITO (1993) 46 TTJ (BOM) ( TM) 668 (SUPRA) THE ASSESSEE HAD FILED REVISED RETURN SHOWI NG FURTHER INCOME AND ASSESSMENTS WERE MADE EX PARTE. IN ALL APPEALS ASSE SSMENTS WERE SET ASIDE. THE ASSESSEE FURTHER REVISED THE RETURN BY A DMITTING HIGHER INCOME. 16 THE ASSESSMENTS WERE COMPLETED ON THE REVISED RETUR N. IT WAS HELD THAT LEVY OF PENALTY IS JUSTIFIED BECAUSE NO CREDITOR AP PEARED BEFORE THE AO AND ASSESSEE SURRENDERED FURTHER INCOME ON QUESTION ING BY THE DEPARTMENT. THE FILING OF THE REVISED RETURN WAS NO T VOLUNTARY AND THERE WAS MATERIAL ON RECORD TO SHOW THAT THE DEPARTMENT WAS ENQUIRING INTO THE GENUINENESS AS WELL AS CREDITWORTHINESS OF THE LOAN AT WHICH POINT OF TIME ASSESSEE CAME FORWARD WITH THE FILING OF VOLUNTARY RETURNS THEREBY PREVENTING THE DEPARTMENT FROM PURSUING THE MATTER FURTHER. 15. WHEN WE APPLY THE PRINCIPLES LAID DOWN IN ABOVE CASES TO THE FACTS OF THE PRESENT CASE WE FIND THAT THE AO HAD CARRIE D OUT ENQUIRIES INTO THE CASH CREDIT OF RS.30 LACS SUMMONED THE CREDITORS R ECORDED THEIR STATEMENTS WHO EXPRESSED THEIR IGNORANCE ABOUT THE CREDS AND INFORMED THE AO THAT SHRI JAGDISH PATEL KNEW EVERY THING. IT WAS ONLY AFTER THIS THAT THE AO SUMMONED JAGDISH PATEL RECORDED HIS ST ATEMENT WHO FINALLY SURRENDERED THE SUM OF RS.30 LACS AS AN INCOME OF T HE FIRM. SECONDLY THE CREDITORS WERE NOT STRANGERS TO THE FIRM AND THEY W ERE WIVES OF THE PARTNERS OR CLOSE RELATIONS. THEIR NAMES WERE USED TO INTRODUCE THE UNACCOUNTED INCOME OF THE FIRM. THIRDLY NO EVIDENC E HAS BEEN FURNISHED BY THE FIRM SO AS TO SHOW AS TO IN WHICH YEAR SUCH INCOME WAS EARNED. NO NAME OF ANY PARTY ALLEGEDLY GIVING COMMISSION TO TH E FIRM WAS GIVEN. THE INFORMATION PROVIDED BY SHRI JAGDISH PATEL WAS UNSUBSTANTIATED AND WAS ALSO NOT SUBJECTED TO ANY VERIFICATION BY THE D EPARTMENT AS NO VERIFIABLE INFORMATION WAS PROVIDED. 16. FROM THE DISCUSSION HELD ABOVE WE HOLD THAT PEN ALTY IS ALSO LEVIABLE WITHIN THE MEANING OF EXPLANATION 1(B) OF SECTION 271(1)(C). THERE ARE THREE INGREDIENTS WHICH ARE REQUIRED TO B E SATISFIED. THEY ARE (I) ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE (II) 17 HE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FID E & (III) HE FAILS TO PROVE THAT ALL THE FACTS RELATING TO THE EXPLANATION AND MATERIAL TO COMPUTATION OF HIS TOTAL INCOME HAS BEEN DISCLOSED BY HIM. THE EXP LANATION FURNISHED BY THE ASSESSEE FIRM IS THAT THE CASH REPRESENTED UNAC COUNTED INCOME EARNED IN EARLIER YEARS PARTICULARLY FROM 1987 ONWARDS. TH IS UNACCOUNTED INCOME WAS EARNED BY WAY OF COMMISSION CHARGED FROM PARTIE S FOR WHOM THE FIRM MEDIATED AS MEDIATOR FOR EFFECTING THEIR SALES AND PURCHASES. THIS EXPLANATION WAS NOT SUBSTANTIATED IN AS MUCH AS NO SPECIFIC YEAR OF EARNING INCOME WAS INFORMED NO NAME OF THE PARTIES FOR WHOM SUCH MEDIATION WAS DONE WAS GIVEN NO RATE OF COMMISSION WAS ALSO PROVIDED. NO DOCUMENTARY EVIDENCE IN SUPPORT OF EXPLANATION W AS FURNISHED. THEREFORE NOT ONLY ASSESSEE WAS UNABLE TO SUBSTANT IATE THE EXPLANATION FURNISHED BY HIM BUT ALSO FAILED TO PROVE THAT ALL THE FACTS RELATING TO THE EXPLANATION ARE DISCLOSED BY HIM. ONCE THE INGREDIE NTS OF CLAUSE (B) TO EXPLANATION-1 TO SECTION 271(1)(C) ARE FULFILLED AN D AO HAS CLEARLY ESTABLISHED THAT CLAUSE (B) CAN BE INVOKED THEN LEV Y OF PENALTY HAS TO FOLLOW. IN VIEW OF THIS LEVY OF PENALTY IS CONFIRM ED AND APPEAL OF THE ASSESSEE IS DISMISSED. 17. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 23/4/2010 MAHATA/- ORDER PRONOUNCED IN OPEN COURT ON 23/4/2010 18 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD