1. S. 4: Income – Chargeable as – Assessee’s books actually showing a cash balance of above Rs.38,000 as on the day immediately preceding the date of demonetisation. – In the absence of material before the Tribunal, it could not have held that only 22 out of 28 high denomination notes
represented cash balance and the remaining 6 constituted income from undisclosed sources.
Allahabad HC had reversed ITAT order upholding undisclosed income addition to the tune of Rs.6000/- during AY 1947-48. In the present case, assesseeencashed 28 high denomination notes of Rs.1,000 each after issuance of High Denomination Bank Notes (Demonetisation) Ordinance, 1946. On being asked to explain the source of the notes, the assessee stated that it had a closing balance; in respect of the account maintained for its business, on 11-1-1946 and that these 28 notes had come out of the aforesaid closing cash balance. However ITO disbelieved explanation and treated entire amount as assessee’s income from an undisclosed source. On appeal, Tribunal partly upheld addition by holding that 22 notes of the denomination of Rs. 1,000 each could have come out of the cash balance of Rs. 38,000 and odd, but was not satisfied that the balance of six notes of Rs. 1,000 each were also from the same source. Accepted that 22 notes out of 28 could have come out of cash balance,however remaining 6 notes could not have formed part of such balance. On further appeal by assessee, HC held that finding of Tribunal was based upon surmises and conjectures and cannot be upheld. HC relied on coordinate bench ruling in Kanpur Steel Co. v. CIT [[1957] 32 ITR 56]. [Corresponding to s.3 of the Indian Income-tax Act, 1922] (AY.1947-48)
Madhuri Das Narain Das vs. CIT[1968] 67 ITR 368 (ALL.)(HC)
2. S. 68 : – Cash credits – Burden of proof — If explanation of the assessee is not found satisfactory – assessee’s claim about the amount is not genuine
Assessee had shown certain amounts in capital accounts in books claiming same to be winnings from horse races. She filed sworn statement to effect that she started going for races only towards end of year 1969 and had no experience in races but she purchased jackpot tickets on combination worked out by her on basis of advice given by her husband. She had allegedly won 16 jackpots besides trebles. The A.O. disbelieved her version and taxed amount as income from undisclosed sources. The Settlement Commission by its majority order upheld assessment order holding that it was reasonable to infer, on facts, that assessee did not participate in races but purchased winning tickets after events with unaccounted money. Matter in question had to be considered in light of human probabilities. Having record to conduct of assessee as disclosed by her in sworn affidavit as well as other material on record, an inference could reasonably be drawn that winning tickets were purchased by her after race event. Therefore, finding of majority of Settlement Commission that amount in question was not winnings from horse races but income from undisclosed sources was justified. (A.Y.1971-72 and 1972-73)
SumatiDayal v. CIT[1995] 214 ITR 801 (SC)
3. S.69: Income from undisclosed sources – Burden of proof – Tribunal having accepted that some of the high denomination notes belonged to assessee, it could not have treated the value of balance notes as assessee’s undisclosed income on the material on record.
The assessee carried on business in cloth, parchoon, kerosene and salt and had also income from zamindari. With the demonetisations of high denomination notes in January, 1946, the assesseeencashed 21 high denomination notes. The assessee claimed to have received them in the usual course of business and formed part of his cash balance. The ITO as well as the AAC, on appeal, rejected the explanation of the assessee in regard to the source of the 21 high denomination notes and included the entire amount represented by these notes in the total income of the assessee as his income from some undisclosed source. On second appeal, the Tribunal took the view, that it was not possible for the assessee to get these notes either in his business from parchoon, kerosence and salt or out of zamindari. It, however, accepted the position that some of these notes might have come into his possession in the course of his business in cloth.
The Tribunal ultimately came to conclusion that out of 21 high denomination notes the possibility of the assessee having had eight high denomination notes could be accounted in the cloth business. In regard to the remaining 13 high denomination notes, they affirmed the view of the income-tax authorities.
The Honourable High Court Held that, Tribunal having accepted that some of the high denomination notes belonged to assessee, it could not have treated the value of balance notes as assessee’s undisclosed income on the material on record. [Corresponding to s.23(3) of the Indian Income-tax Act, 1922](A.Y.1947-48)
Gur Prasad Hari Das v. CIT [1963] 47 ITR 634 (All.)(HC)
4. S. 69 : Unexplained investments – Cash received on sale of property shown as income – Buyer of property denied having paid any cash – Deletion of addition was held to be justified. [S.153A]
During search at assessee’s premises it was found that assessee had purchased a property (AnandNiketan property). Assessee explained that his company RFPL had received cash amount of Rs. 1 crore on account of sale of other property (Golf Link property) and said amount was used by assessee for purchasing Anand Niketan property . Buyer of Golf Link property, however, denied to have paid any cash to RFPL. On that basis Assessing Officer held that cash involved in purchase of AnandNiketan property remained unexplained and made addition accordingly. Appellate authorities deleted addition on ground that RFPL had shown cash receipt of Rs. 100 lakhs on account of sale of a property and had declared long-term capital gain on basis of sale proceeds of Rs. 255 lakhs which had been accepted by Assessing Officer of that company and, hence, it had to be accepted that this much cash was received by that company. On appeal by revenue the Court held that; on given fact-intensive nature of matter, findings recorded by appellate authorities were to be upheld .
CIT v. Tilak Raj Anand (2015) 373 ITR 1/ 232 Taxman 653 (Delhi)(HC)
5. S. 69 : Unexplained investments –Shortage of cash- Cannot be set off against unexplained investment on mere presumption.[S. 158BC]
Assessee, a partnership firm, was engaged in business of money lending business. During its search proceeding, shortage of cash was found. Assessing Officer treated it as undisclosed income on account of unexplained investment.However, Tribunal allowed set off of this shortage of cash on presumption that this shortage was an investment in unaccounted money lending business On appeal by revenue allowing the appeal the Court held that; where undisclosed income remained unexplained by assessee, there was no reason to give set off on a presumption that said amount was invested in unaccounted money lending business.
CIT v. Meriya Bankers, Chits & Investments (2015) 232 Taxman 117 (Ker.)(HC)
6. S.69:Unexplained investments-Search and seizure-Affidavit-Gold and gold ornaments-Assessee filing affidavits containing details of gifted jeweler-addition to be deleted. [S.132]
The Assessing Officer made addition of the value of gold jewellery, and gold ornaments found in the locker owned jointly by the assessee and his wife. They were explained to belong to the assessee`s wife, giving the break-up thereof. The Assessing Officer did not accept this as the assessee`s wife was a wealth tax payer for the relevant year, i.e., in which the gift was received, and also for the subsequent years, while this gift was not verifiable with reference to her total wealth. The Commissioner (Appeals) deleted the addition holding that the affidavits contained full details of the gifted jewellery, the genuineness of which had not been doubted by the Assessing Officer. On appeal by the Department :
Held, (i) that once the assessee had furnished the affidavits, it was incumbent on the Assessing Officer to cross-examine the deponents. The quantity claimed to be received in gift was not high in relation to the status of the assessee’s family or of the donors. Also, a reference to the wealth-tax returns of the assessee`s wife was not relevant in view of a change in the wealth-tax law with effect from assessment year 1995-96. The order of the Commissioner (Appeals) was to be upheld in the case of the assessee.
ACIT .v. Dwaraka Prasad Malpani (2012) 135 ITD 323 /N 146 TTJ 498 / (2013) 21 ITR 719 (Cochin) (Trib.)
7. S. 69A: Unexplained money etc. – In pursuance of High Denomination Bank Notes (Denomination) Ordinance, 1946 – Revenue authorities could not treat income from undisclosed sources if explanation was reasonable.
Assessee Company exchanged 32 high denomination notes. Regarding source of these high denomination notes, assessee claimed that these notes represented part of its cash balance. The ITO rejected claim of assessee and held that amount represented by those currency notes was suppressed income of assesse. The Tribunal though did not fond assessee’s explanation to be false, yet it deleted only a part of amount added back by ITO as income from undisclosed sources. The Honourable High Court observed that when Assesseehad given an explanation which was reasonable, revenue authorities could treat amount in question as income from undisclosed sources only if there was some other material from which such inference could have been drawn. Since, no other material had been mentioned, it could be concluded that amount being value of high denomination currency notes exchanged in pursuance of 1946 ordinance, did not represent income of Assessee from undisclosed sources. [Corresponding to s. 23 of the Indian Income-tax Act, 1922](AY. 1948 – 1949)
Kanpur Steel Co. Ltd. v. CIT [1957] 32 ITR 56 (All.)(HC)
8. S. 69A: Unexplained moneys – books of accounts of assessee were accepted by revenue as genuine – assessee not required to prove source of receipt of said high denomination notes which were legal tender at that time.
It is a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the income or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time.(AY. 1946 – 47)
Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.)(HC)
9. S. 69A: Unexplained moneys – books of accounts of assessee were accepted by revenue as genuine – assessee not required to prove source of receipt of said high denomination notes which were legal tender at that time.
It is a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the income or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time.(AY. 1946 – 47)
Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.)(HC)
10. S. 69A: unexplained money— on demonetisation of high denomination notes, assessee deposited such notes in bank declaring their source as past profits—in subsequent statement made in course of survey, source was given as withdrawal from a partnership firm, but examination of entries’ in firm’s books made possession of such high denomination cash by firm on date of withdrawal improbable—ITO was justified in treating impugned high denomination cash as assessee’s income.
There was a clear contradiction in the two statements of the assessee about the source of the impugned amount. Had the source of the notes been his past profits as stated on 19-1-1978, there was no necessity for him to state subsequently that the amount had been withdrawn from the firm. Clearly if it represented his past profits, there was no need for any withdrawal from the firm. Also, the certificate of the firm was in general terms and there was no other contemporaneous evidence to corroborate the assessee’s case. Even the firm itself had not explained the source of high denomination notes worth more than Rs. 6 lakhs and had asked for a settlement.
Considering all the evidence produced by the assessee, the conclusion would be that the notes were never part of the firm’s cash and the assessee had not been able to establish this fact. The lower authorities were, accordingly, justified in making the addition. (A.Y. 1978-79)
Naresh Kumar Tulshan V. ITO [1985] 11 ITD 537 (Mum)(Trib.)
11. S. 69A: Unexplained money – High denomination currency encashed on demonetisation – Merely because assessee not mention high denomination notes in books before demonetization would not justify addition.
The assessment of the Assessee was completed after making certain additions to the income. On second appeal the Tribunal with minor changes accepted the figures given by the assessee. Thereafter the ITO received information that the assessee had exchanged high denomination notes to the extent of Rs 68,000/- after the passing of the Demonetization Ordinance on 12-1-1946. A proceeding u/s. 34 was started against the assessee and as a result of this proceeding the ITO held that an additional sum of Rs.68,000/- should be added to the income of the assessee. An appeal was preferred by the assessee against this assessment before the AAC but the appeal was dismissed. A further appeal was taken before the Tribunal who took the view that out of the sum of Rs.68,000/- only a portion, Rs.35,000/- should be treated as coming out of the cash balance of the business and the rest of the amount of Rs.33,000/- should be treated as secreted profit of the assessee, liable to be taxed.
Tribunal is a judicial tribunal and u/s. 33 of 1922 Act the powers conferred on the Tribunal are very wide and extensive. It is essential in the public interest that these powers should be exercised by the Tribunal carefully and in a judicial manner. In the present case it is a matter of regret that the Tribunal has not indicated upon what material they have reached the conclusion that the amount of Rs.33,000/- out of the amount of Rs.68,000/- should be treated as secreted profit of the assessee. Therefore, the order of the Tribunal is bad on account of this defect As it must indicate the material on which the conclusion is based. [Corresponding to s.33 of the Indian Income-tax Act, 1922](AY.1946-47)
ChunilalTicamchand Coal Co. Ltd. v. CIT [1955] 27 ITR 602 (Pat.)(HC)
12. S. 69A: Unexplained money-Jewellary-No addition can be made inn repect of jewellery found withinthe limits prescribed in the circular. [S. 153A)
No addition u/s 69A could be made if the Jewellery found during the search is within the limit as prescribed by the Board Instruction No.1916 dt 11.05.1994 as per the Indian custom and tradition where a married lady is permitted to possess to the extent of 500gms, 250 gms per unmarried lady and 100gms per male members in a family. On the facts of the case the extent of 2700gms, was held to be reasonable and deletion was held to be justified. ( AY. 2005-06 ).
CIT .v. SatyaNarainPatni(2014) 366 ITR 325/269 CTR 466/214 Taxman 312 (Raj.)(HC)
13. S. 69A :Unexplained money–Survey-Shortage of cash and gold ornaments–Shortage of ornaments at best be treated as undisclosed sales and not as undisclosed investment.[S.133A]
During course of survey operations, certain shortages pertaining to cash in hand, gold ornaments, diamond items and silver items was noticed. Tribunal held that merely because shortages had been noticed as compared to books, it could not be said that any undisclosed investment/money was made by assesse. Whether cash might have been used for making unaccounted purchases or other purposes for which no cogent material was available and in such circumstances merely on conjectures or surmises addition under section 69A was unsustainable. As regards shortage in gold, silver and diamond ornaments could at best be treated as undisclosed sales and not undisclosed investment.Appeal of revenue was partly allowed.(ITA No. 1736 (Kol.) of 2009 dt. 05-06-2014) (AY. 2005-06)
ITO .v.Subhas Brothers Jewellers (P.) Ltd. (2014) 33 ITR 66 / 51 taxmann.com 422 / (2015) 67 SOT 50(URO)(Kol.)(Trib.)
14. S. 143 (3) : Assessment – Additions to income –assessee was unable to adduce any evidence or confirmation from currency – addition justified.
ITO found that during accounting year relevant to assessment year, Assessee had encashed two denomination notes of Rs.10,000/- each. On being questioned, assessee stated that same were received from currency office, but he didn’t produce any evidence. On reference being made to currency officer, ITO was informed that no record showing names and addresses of persons to inform high denomination notes were issued was maintained by that office. Accordingly, ITO made an addition in that respect, further found that assessee had lent a sum in form of high denomination notes to ‘S’. Assessee stated that these high denomination notes were part of sale proceeds of his property for Rs.1,53,000 /–. ITO found that said high denominations notes were encashed by ‘S’ and tallied with notes mentioned in deed of conveyance only to extent of Rs.1,10,000/-. So far as balance of Rs.16,000 was concerned, ITO did not accept assessee’s explanation that he received one high denomination note of Rs.10,000/- in exchange for smaller denomination notes from ‘R’ and Rs.6,000/- was cash in hand as neither books of account nor any other evidence was produced in support of such contentions and also treated same as assessee’s income from disclosed sources. Whether tallying was done with number of notes encashed by ‘S’ that was not assessee itself even though it was closely associated with assessee and, therefore, explanation that either assessee or S who had cash in hand in notes might have changed one high denomination note, was not inherently improbable. As regards to Rs.6,000/- which assessee had with him, onus was on assessee to establish that assessee had this amount of cash with him and since he had failed to discharge that onus to satisfaction of revenue authority, addition of that amount was justified. As regards to denomination received from currency office, assessee wanted an opportunity before Tribunal to prove that from currency office and Tribunal gave such an opportunity to assessee but inspite of that, assessee was unable to adduce any evidence or confirmation from currency officer regarding high denomination notes of face value of Rs.20,000/- and, therefore, addition in that respect was justified. (AY. 1945 – 1946)
Anil Kumar Singh v. CIT [1972] 84 ITR 307 (Cal.)(HC)
15. S. 143 (3) : Assessment – Additions to income – Encashment of high denomination notes – Cash book of assessee having been accepted, there could not have been challenged by the Revenue.
The assessee firm was carrying on mill store business at Ahmedabad. The Governor-General on 12-1-1946, promulgated the High Denomination Bank Notes (Demonetisations) Ordinance, 1946, and high denominations bank notes ceased to be legal tender on the expiry of 12-1-1946. Pursuant to clause 6 of the Ordinance the assessee, on 18-1-1946, encashed high denomination notes of Rs.100 each of the face value of Rs.61,000/-. During the assessment proceedings for the year 1947-48 the ITO called upon the assessee to prove from whom and when the said high denomination notes were received by the assessee and also the bona fides of the previous owners thereof. After examining the entries in the books of account of the assessee and the position of the cash balances on various dates 20th December, 1945, to 18th January, 1946, and the nature and extent of the receipts and payments during the relevant period, the ITO came to the conclusion that in order to sustain the contention of the appellants it would have to presumed that there were 18 high denomination notes of Rs.1,000/- each in the cash balance on 1-1-1946, and that all cash receipts after 1-1-1946, and before 13-1-1946, were received in currency notes of Rs.1,000/- each, a presumption which was impossible to make in the absence of any evidence. He, therefore, added the sum of Rs. 61,000 to the assessable income of the assessee from undisclosed sources. The AAC upheld the said addition. The Tribunal accepted the assessee’s explanation only in regard to 31 notes and directed that the assessment for the year under reference be reduced by that amount and dismissed the rest of the appeal. On reference to the High Court held that the finding of the Tribunal was a finding of fact based on materials before it.
The Supreme Court held that Cash book of assessee having been accepted, and deponents not having been examined, these could not have been challenged by the Revenue and there was no justification for accepting the explanation of assessee in part and treating 30 notes out of 61 notes of Rs.1,000/- denomination as income from undisclosed sources. [Corresponding to s. 23 of the Indian Income-tax Act, 1922](A.Y.1947 – 48)
Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 (SC)
16. S. 143(3) : Assessment (Benami transactions) – the unit ‘P’ belongs to assessee and income of such unit is income of the assessee. So the income of the unit ‘P’ should be clubbed with the income of the assessee.
Assessee filed returns of his daughter declaring income derived from a fabrication unit ‘P’. He stated that daughter was deriving income from unit ‘P’. She was married in year 1994 and after marriage she could not give personal attention and executed power of attorney in Assess’s favour to run said unit. The daughter had purchased said unit from her mother on payment of Rs.10,000/- and executed a promissory note of Rs.60,000/- as security in favour of her mother. The Unit was a separate small scale unit under Director of Industries and had got licence under sales tax department. The A.O. clubbed income of daughter derived from unit with income of assessee on plea that income declared by daughter belonged to assesse. Since it was apparent from record that unit was neither owned by daughter nor by wife, it would have to be held that unit was benami property of assessee and income of such unit was income of assesse. Therefore income of unit was rightly clubbed within income of assesse. (A.Y.1992 – 1993 to 1997 – 1998)
Sri SuruBhaskarRao vs. CIT (2016) 386 ITR 419(Orrissa)(HC)
17. S. 145 : Method of accounting – Valuation of stock- Survey-Stock found less than the stock shown in trading account-Addition as unaccounted sale was not justified.[S.133A]
Closing stock found during survey was found less than closing stock shown in trading account. This, according to Assessing Officer, proved shortage of stock and unaccounted sales. On facts addition made by Assessing Officer was totally uncalled for.
Safari Bikes Ltd. v. JCIT (2014) 33 ITR 665 / 166 TTJ 216 / (2015) 67 SOT 257 (Chd.) (Trib.)
18. S. 147 : Income-escaping assessment – If there is entry in account books of assessee which shows receipt of sum on conversion of high denomination notes – failed to explain source of said money, department was justified in treating value of said high denomination notes as income.
The assessee was the owner of several collieries-coal fields and was also a contractor for raising coal. For the A.Y. 1946-47, the assessment of the assessee was completed. Subsequently, the ITO reopened the assessment on finding that the assessee was in possession of some high denomination notes. The assessee contended that for conducting the business and payment to labour he had to pay every week in thousands; that as he did not get payment for work done every week he had to keep large sum of money to meet emergency and thatit was neither profit nor part of profit, it was very floating capital for purpose of conducting business. He also stated that he had accounts with India, at some banks, but added that he did not remember exactly from which bank the notes came into his possession as his transactions were frequent. The ITO pointed out that the business of the assessee was large and the withdrawals from the various banks were large and frequent, he had not maintained a central account showing withdrawals from the banks and remittances made to his various businesses, and that none of the books maintained by the assessee, and produced by him, contained a bank account. The ITO found a discrepancy in the statements filed by the assessee. He, accordingly, treated the high denomination notes as profits from some undisclosed source and assessed them as assessable income. On appeal, the AAC as well as the Tribunal confirmed the order of the ITO.
The Honourable High Court had taken a view that, there were materials to show that the value of the High denomination notes not form part of the cash balance, and the source of money not having been satisfactorily proved, the department was justified in holding it to be the assessable income of the assessee from some undisclosed course. The same has been confirmed by the Supreme Court. (Corresponding to s. 34 of the Indian Income-tax Act, 1922](AY. 1946 – 1947)
Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC)
19. S. 271(1)(c) : Penalty – For concealment of income – Assessee declared on 19-1-1978 five high denomination notes of Rs.10,000/- each acquired from certain bank – On enquiry bank denied having issued such notes – Assessment was completed on a total of Rs.60,000 rejecting assessee’s explanation and penalty u/s.271(1)(c) was levied. Tribunal cancelled penalty on ground that explanation of assessee was rejected merely on plea that certificate from bank was dated 9-1-1979 as against declaration on 19-1-1978. In fact no certificate was filed but letter issued by bank was dated 9-1-1979 – Since order was passed by Tribunal merely on one statement and real factual position was not kept in mind, Tribunal was unjustified in cancelling penalty.
In the present case, assessee declared five high denomination notes of Rs. 10,000 each acquired from certain bank. On enquiry bank denied having issued such notes. Assessment was completed on a total of Rs. 60,000 rejecting assessee’s explanation and penalty under section 271(1)(c) was levied. Tribunal cancelled penalty on ground that explanation of assessee was rejected merely on plea that certificate from bank was dated January 9, 1979 as against declaration on January 19th, 1978. In fact no certificate was filed but letter issued by bank was dated January 9, 1979. Delhi HC held that tribunal was not justified in cancelling penalty on one statement and real factual position was not kept in mind. It was held that “Tribunal has not kept in view the real factual position and was not justified in cancelling the penalty. We may note that there was submission made by the assessee before the Tribunal that Commissioner, Delhi-II had considered that there was no concealment or misrepresentation and the prosecution case was to be withdrawn. No material seems to have been placed before the Tribunal to test the correctness of the said stand”. (A.Y. 1978 – 1979)
CIT v. Allied International Product Ltd. [2002] 120 Taxman 589 (Del)(HC)
20. S. 271(1)(c) : Penalty – For concealment of income –Addition made to income of assesse u/s. 69A and also levied a penalty u/s. 271(1)(c) on ground that though assessee was in possession of high denomination notes, it had not recorded same in books of account maintained by it and had failed to offer any explanation about nature and source of acquisition of money. assessee was found to be in possession of said high denomination notes, same did not have any representative value as RBI had refused to honour said notes when tendered for exchange, it could not be said that assessee was in possession of unexplained money warranting levy of penalty.
In the present case, assessee was found in possession of unexplained money in form of high denomination notes, which had ceased to be legal tender and had no value in market at all in terms of Ordinance issue by Government in 1978. Upon additions u/s 69A made by AO for unexplained money and penalty levied u/s 271(1)(c), Bangalore ITAT held that “Since assessee was found in possession of unexplained money in the form of high denomination notes after these notes had ceased to be legal tender, addition under s. 69A is unsupportable and question of levying penalty under s. 271(1)(c) cannot arise.”(A.Y. 1978 – 1979)
CIT vs. Andhra Pradesh Yarn Combines (P) Ltd.(2006) 282 ITR 490 (Ker.)(HC)
21. S. 271(1)(c) : Penalty – Concealment – Assessee disclosing particulars of income and surrendering entire amount in return duly filed. Penalty cannot be levied.
Where income surrendered by assessee during survey had been shown by it in its regular income-tax return filed within prescribed time, penalty could not be imposed upon it u/s. 271(1)(c). (A.Y. 2003 – 2004)
CIT vs. SAS Pharmaceuticals (2011) 335 ITR 259 (Del.)(HC).
22. S. 271(1)(c): No penalty can be levied solely on the basis of admission made during survey if there is no corroborative evidence & no fault is found with the return of income
Mere admission by the assesseee in the statement given during the course of the survey itself cannot be a conclusive piece of evidence, unless such a surrender is corroborated by any evidence or material discovered during the course of the survey proceedings or by enquiry thereafter. Hence, penalty cannot be levied solely on the basis of admission made during survey.
ACIT vs. Crescent Property Developers ITA No. 2770/M/2012, Dt. 19/6/2014. And ShriDilip M. Shah Mumbai vs. ACIT ITA 4413/Bom/98 A.Y. 1994-95 dt. 25/1/1999.
23. Constitutional validity – High Denomination Bank Notes (Demonetisation) Act, 1978 and Articles 19 and 31 of Constitution of India
Appellants challenged constitutional validity of impugned Act on ground that it extinguished debts due and owing from Reserve Bank to holders of high denomination bank notes which violated Articles 19 (1) (f), 19 (1) (g) and 31. Object of impugned Act was to avoid menace of unaccounted money. And said object was public purpose.
The Supreme Court observed and held that Act not violative of Article 31 as property being compulsorily acquired for public purpose. Impugned Act not violative of Articles 19 (1) (f) and 19 (1) (g) as after compulsory acquisition of property under impugned Act rights of appellants stood extinguished and question of unreasonable restrictions on exercise of rights cannot arise therefore High Denomination Bank Notes (Demonetisation) Act, 1978 Act is a valid legislation.
JayantilalRatanchand Shah, DevkumarGopaldasAggarwal and others Vs. Respondent: Reserve Bank of India and others. AIR 1997 SC 370
represented cash balance and the remaining 6 constituted income from undisclosed sources.
Allahabad HC had reversed ITAT order upholding undisclosed income addition to the tune of Rs.6000/- during AY 1947-48. In the present case, assesseeencashed 28 high denomination notes of Rs.1,000 each after issuance of High Denomination Bank Notes (Demonetisation) Ordinance, 1946. On being asked to explain the source of the notes, the assessee stated that it had a closing balance; in respect of the account maintained for its business, on 11-1-1946 and that these 28 notes had come out of the aforesaid closing cash balance. However ITO disbelieved explanation and treated entire amount as assessee’s income from an undisclosed source. On appeal, Tribunal partly upheld addition by holding that 22 notes of the denomination of Rs. 1,000 each could have come out of the cash balance of Rs. 38,000 and odd, but was not satisfied that the balance of six notes of Rs. 1,000 each were also from the same source. Accepted that 22 notes out of 28 could have come out of cash balance,however remaining 6 notes could not have formed part of such balance. On further appeal by assessee, HC held that finding of Tribunal was based upon surmises and conjectures and cannot be upheld. HC relied on coordinate bench ruling in Kanpur Steel Co. v. CIT [[1957] 32 ITR 56]. [Corresponding to s.3 of the Indian Income-tax Act, 1922] (AY.1947-48)
Madhuri Das Narain Das vs. CIT[1968] 67 ITR 368 (ALL.)(HC)
2. S. 68 : – Cash credits – Burden of proof — If explanation of the assessee is not found satisfactory – assessee’s claim about the amount is not genuine
Assessee had shown certain amounts in capital accounts in books claiming same to be winnings from horse races. She filed sworn statement to effect that she started going for races only towards end of year 1969 and had no experience in races but she purchased jackpot tickets on combination worked out by her on basis of advice given by her husband. She had allegedly won 16 jackpots besides trebles. The A.O. disbelieved her version and taxed amount as income from undisclosed sources. The Settlement Commission by its majority order upheld assessment order holding that it was reasonable to infer, on facts, that assessee did not participate in races but purchased winning tickets after events with unaccounted money. Matter in question had to be considered in light of human probabilities. Having record to conduct of assessee as disclosed by her in sworn affidavit as well as other material on record, an inference could reasonably be drawn that winning tickets were purchased by her after race event. Therefore, finding of majority of Settlement Commission that amount in question was not winnings from horse races but income from undisclosed sources was justified. (A.Y.1971-72 and 1972-73)
SumatiDayal v. CIT[1995] 214 ITR 801 (SC)
3. S.69: Income from undisclosed sources – Burden of proof – Tribunal having accepted that some of the high denomination notes belonged to assessee, it could not have treated the value of balance notes as assessee’s undisclosed income on the material on record.
The assessee carried on business in cloth, parchoon, kerosene and salt and had also income from zamindari. With the demonetisations of high denomination notes in January, 1946, the assesseeencashed 21 high denomination notes. The assessee claimed to have received them in the usual course of business and formed part of his cash balance. The ITO as well as the AAC, on appeal, rejected the explanation of the assessee in regard to the source of the 21 high denomination notes and included the entire amount represented by these notes in the total income of the assessee as his income from some undisclosed source. On second appeal, the Tribunal took the view, that it was not possible for the assessee to get these notes either in his business from parchoon, kerosence and salt or out of zamindari. It, however, accepted the position that some of these notes might have come into his possession in the course of his business in cloth.
The Tribunal ultimately came to conclusion that out of 21 high denomination notes the possibility of the assessee having had eight high denomination notes could be accounted in the cloth business. In regard to the remaining 13 high denomination notes, they affirmed the view of the income-tax authorities.
The Honourable High Court Held that, Tribunal having accepted that some of the high denomination notes belonged to assessee, it could not have treated the value of balance notes as assessee’s undisclosed income on the material on record. [Corresponding to s.23(3) of the Indian Income-tax Act, 1922](A.Y.1947-48)
Gur Prasad Hari Das v. CIT [1963] 47 ITR 634 (All.)(HC)
4. S. 69 : Unexplained investments – Cash received on sale of property shown as income – Buyer of property denied having paid any cash – Deletion of addition was held to be justified. [S.153A]
During search at assessee’s premises it was found that assessee had purchased a property (AnandNiketan property). Assessee explained that his company RFPL had received cash amount of Rs. 1 crore on account of sale of other property (Golf Link property) and said amount was used by assessee for purchasing Anand Niketan property . Buyer of Golf Link property, however, denied to have paid any cash to RFPL. On that basis Assessing Officer held that cash involved in purchase of AnandNiketan property remained unexplained and made addition accordingly. Appellate authorities deleted addition on ground that RFPL had shown cash receipt of Rs. 100 lakhs on account of sale of a property and had declared long-term capital gain on basis of sale proceeds of Rs. 255 lakhs which had been accepted by Assessing Officer of that company and, hence, it had to be accepted that this much cash was received by that company. On appeal by revenue the Court held that; on given fact-intensive nature of matter, findings recorded by appellate authorities were to be upheld .
CIT v. Tilak Raj Anand (2015) 373 ITR 1/ 232 Taxman 653 (Delhi)(HC)
5. S. 69 : Unexplained investments –Shortage of cash- Cannot be set off against unexplained investment on mere presumption.[S. 158BC]
Assessee, a partnership firm, was engaged in business of money lending business. During its search proceeding, shortage of cash was found. Assessing Officer treated it as undisclosed income on account of unexplained investment.However, Tribunal allowed set off of this shortage of cash on presumption that this shortage was an investment in unaccounted money lending business On appeal by revenue allowing the appeal the Court held that; where undisclosed income remained unexplained by assessee, there was no reason to give set off on a presumption that said amount was invested in unaccounted money lending business.
CIT v. Meriya Bankers, Chits & Investments (2015) 232 Taxman 117 (Ker.)(HC)
6. S.69:Unexplained investments-Search and seizure-Affidavit-Gold and gold ornaments-Assessee filing affidavits containing details of gifted jeweler-addition to be deleted. [S.132]
The Assessing Officer made addition of the value of gold jewellery, and gold ornaments found in the locker owned jointly by the assessee and his wife. They were explained to belong to the assessee`s wife, giving the break-up thereof. The Assessing Officer did not accept this as the assessee`s wife was a wealth tax payer for the relevant year, i.e., in which the gift was received, and also for the subsequent years, while this gift was not verifiable with reference to her total wealth. The Commissioner (Appeals) deleted the addition holding that the affidavits contained full details of the gifted jewellery, the genuineness of which had not been doubted by the Assessing Officer. On appeal by the Department :
Held, (i) that once the assessee had furnished the affidavits, it was incumbent on the Assessing Officer to cross-examine the deponents. The quantity claimed to be received in gift was not high in relation to the status of the assessee’s family or of the donors. Also, a reference to the wealth-tax returns of the assessee`s wife was not relevant in view of a change in the wealth-tax law with effect from assessment year 1995-96. The order of the Commissioner (Appeals) was to be upheld in the case of the assessee.
ACIT .v. Dwaraka Prasad Malpani (2012) 135 ITD 323 /N 146 TTJ 498 / (2013) 21 ITR 719 (Cochin) (Trib.)
7. S. 69A: Unexplained money etc. – In pursuance of High Denomination Bank Notes (Denomination) Ordinance, 1946 – Revenue authorities could not treat income from undisclosed sources if explanation was reasonable.
Assessee Company exchanged 32 high denomination notes. Regarding source of these high denomination notes, assessee claimed that these notes represented part of its cash balance. The ITO rejected claim of assessee and held that amount represented by those currency notes was suppressed income of assesse. The Tribunal though did not fond assessee’s explanation to be false, yet it deleted only a part of amount added back by ITO as income from undisclosed sources. The Honourable High Court observed that when Assesseehad given an explanation which was reasonable, revenue authorities could treat amount in question as income from undisclosed sources only if there was some other material from which such inference could have been drawn. Since, no other material had been mentioned, it could be concluded that amount being value of high denomination currency notes exchanged in pursuance of 1946 ordinance, did not represent income of Assessee from undisclosed sources. [Corresponding to s. 23 of the Indian Income-tax Act, 1922](AY. 1948 – 1949)
Kanpur Steel Co. Ltd. v. CIT [1957] 32 ITR 56 (All.)(HC)
8. S. 69A: Unexplained moneys – books of accounts of assessee were accepted by revenue as genuine – assessee not required to prove source of receipt of said high denomination notes which were legal tender at that time.
It is a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the income or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time.(AY. 1946 – 47)
Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.)(HC)
9. S. 69A: Unexplained moneys – books of accounts of assessee were accepted by revenue as genuine – assessee not required to prove source of receipt of said high denomination notes which were legal tender at that time.
It is a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the income or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time.(AY. 1946 – 47)
Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.)(HC)
10. S. 69A: unexplained money— on demonetisation of high denomination notes, assessee deposited such notes in bank declaring their source as past profits—in subsequent statement made in course of survey, source was given as withdrawal from a partnership firm, but examination of entries’ in firm’s books made possession of such high denomination cash by firm on date of withdrawal improbable—ITO was justified in treating impugned high denomination cash as assessee’s income.
There was a clear contradiction in the two statements of the assessee about the source of the impugned amount. Had the source of the notes been his past profits as stated on 19-1-1978, there was no necessity for him to state subsequently that the amount had been withdrawn from the firm. Clearly if it represented his past profits, there was no need for any withdrawal from the firm. Also, the certificate of the firm was in general terms and there was no other contemporaneous evidence to corroborate the assessee’s case. Even the firm itself had not explained the source of high denomination notes worth more than Rs. 6 lakhs and had asked for a settlement.
Considering all the evidence produced by the assessee, the conclusion would be that the notes were never part of the firm’s cash and the assessee had not been able to establish this fact. The lower authorities were, accordingly, justified in making the addition. (A.Y. 1978-79)
Naresh Kumar Tulshan V. ITO [1985] 11 ITD 537 (Mum)(Trib.)
11. S. 69A: Unexplained money – High denomination currency encashed on demonetisation – Merely because assessee not mention high denomination notes in books before demonetization would not justify addition.
The assessment of the Assessee was completed after making certain additions to the income. On second appeal the Tribunal with minor changes accepted the figures given by the assessee. Thereafter the ITO received information that the assessee had exchanged high denomination notes to the extent of Rs 68,000/- after the passing of the Demonetization Ordinance on 12-1-1946. A proceeding u/s. 34 was started against the assessee and as a result of this proceeding the ITO held that an additional sum of Rs.68,000/- should be added to the income of the assessee. An appeal was preferred by the assessee against this assessment before the AAC but the appeal was dismissed. A further appeal was taken before the Tribunal who took the view that out of the sum of Rs.68,000/- only a portion, Rs.35,000/- should be treated as coming out of the cash balance of the business and the rest of the amount of Rs.33,000/- should be treated as secreted profit of the assessee, liable to be taxed.
Tribunal is a judicial tribunal and u/s. 33 of 1922 Act the powers conferred on the Tribunal are very wide and extensive. It is essential in the public interest that these powers should be exercised by the Tribunal carefully and in a judicial manner. In the present case it is a matter of regret that the Tribunal has not indicated upon what material they have reached the conclusion that the amount of Rs.33,000/- out of the amount of Rs.68,000/- should be treated as secreted profit of the assessee. Therefore, the order of the Tribunal is bad on account of this defect As it must indicate the material on which the conclusion is based. [Corresponding to s.33 of the Indian Income-tax Act, 1922](AY.1946-47)
ChunilalTicamchand Coal Co. Ltd. v. CIT [1955] 27 ITR 602 (Pat.)(HC)
12. S. 69A: Unexplained money-Jewellary-No addition can be made inn repect of jewellery found withinthe limits prescribed in the circular. [S. 153A)
No addition u/s 69A could be made if the Jewellery found during the search is within the limit as prescribed by the Board Instruction No.1916 dt 11.05.1994 as per the Indian custom and tradition where a married lady is permitted to possess to the extent of 500gms, 250 gms per unmarried lady and 100gms per male members in a family. On the facts of the case the extent of 2700gms, was held to be reasonable and deletion was held to be justified. ( AY. 2005-06 ).
CIT .v. SatyaNarainPatni(2014) 366 ITR 325/269 CTR 466/214 Taxman 312 (Raj.)(HC)
13. S. 69A :Unexplained money–Survey-Shortage of cash and gold ornaments–Shortage of ornaments at best be treated as undisclosed sales and not as undisclosed investment.[S.133A]
During course of survey operations, certain shortages pertaining to cash in hand, gold ornaments, diamond items and silver items was noticed. Tribunal held that merely because shortages had been noticed as compared to books, it could not be said that any undisclosed investment/money was made by assesse. Whether cash might have been used for making unaccounted purchases or other purposes for which no cogent material was available and in such circumstances merely on conjectures or surmises addition under section 69A was unsustainable. As regards shortage in gold, silver and diamond ornaments could at best be treated as undisclosed sales and not undisclosed investment.Appeal of revenue was partly allowed.(ITA No. 1736 (Kol.) of 2009 dt. 05-06-2014) (AY. 2005-06)
ITO .v.Subhas Brothers Jewellers (P.) Ltd. (2014) 33 ITR 66 / 51 taxmann.com 422 / (2015) 67 SOT 50(URO)(Kol.)(Trib.)
14. S. 143 (3) : Assessment – Additions to income –assessee was unable to adduce any evidence or confirmation from currency – addition justified.
ITO found that during accounting year relevant to assessment year, Assessee had encashed two denomination notes of Rs.10,000/- each. On being questioned, assessee stated that same were received from currency office, but he didn’t produce any evidence. On reference being made to currency officer, ITO was informed that no record showing names and addresses of persons to inform high denomination notes were issued was maintained by that office. Accordingly, ITO made an addition in that respect, further found that assessee had lent a sum in form of high denomination notes to ‘S’. Assessee stated that these high denomination notes were part of sale proceeds of his property for Rs.1,53,000 /–. ITO found that said high denominations notes were encashed by ‘S’ and tallied with notes mentioned in deed of conveyance only to extent of Rs.1,10,000/-. So far as balance of Rs.16,000 was concerned, ITO did not accept assessee’s explanation that he received one high denomination note of Rs.10,000/- in exchange for smaller denomination notes from ‘R’ and Rs.6,000/- was cash in hand as neither books of account nor any other evidence was produced in support of such contentions and also treated same as assessee’s income from disclosed sources. Whether tallying was done with number of notes encashed by ‘S’ that was not assessee itself even though it was closely associated with assessee and, therefore, explanation that either assessee or S who had cash in hand in notes might have changed one high denomination note, was not inherently improbable. As regards to Rs.6,000/- which assessee had with him, onus was on assessee to establish that assessee had this amount of cash with him and since he had failed to discharge that onus to satisfaction of revenue authority, addition of that amount was justified. As regards to denomination received from currency office, assessee wanted an opportunity before Tribunal to prove that from currency office and Tribunal gave such an opportunity to assessee but inspite of that, assessee was unable to adduce any evidence or confirmation from currency officer regarding high denomination notes of face value of Rs.20,000/- and, therefore, addition in that respect was justified. (AY. 1945 – 1946)
Anil Kumar Singh v. CIT [1972] 84 ITR 307 (Cal.)(HC)
15. S. 143 (3) : Assessment – Additions to income – Encashment of high denomination notes – Cash book of assessee having been accepted, there could not have been challenged by the Revenue.
The assessee firm was carrying on mill store business at Ahmedabad. The Governor-General on 12-1-1946, promulgated the High Denomination Bank Notes (Demonetisations) Ordinance, 1946, and high denominations bank notes ceased to be legal tender on the expiry of 12-1-1946. Pursuant to clause 6 of the Ordinance the assessee, on 18-1-1946, encashed high denomination notes of Rs.100 each of the face value of Rs.61,000/-. During the assessment proceedings for the year 1947-48 the ITO called upon the assessee to prove from whom and when the said high denomination notes were received by the assessee and also the bona fides of the previous owners thereof. After examining the entries in the books of account of the assessee and the position of the cash balances on various dates 20th December, 1945, to 18th January, 1946, and the nature and extent of the receipts and payments during the relevant period, the ITO came to the conclusion that in order to sustain the contention of the appellants it would have to presumed that there were 18 high denomination notes of Rs.1,000/- each in the cash balance on 1-1-1946, and that all cash receipts after 1-1-1946, and before 13-1-1946, were received in currency notes of Rs.1,000/- each, a presumption which was impossible to make in the absence of any evidence. He, therefore, added the sum of Rs. 61,000 to the assessable income of the assessee from undisclosed sources. The AAC upheld the said addition. The Tribunal accepted the assessee’s explanation only in regard to 31 notes and directed that the assessment for the year under reference be reduced by that amount and dismissed the rest of the appeal. On reference to the High Court held that the finding of the Tribunal was a finding of fact based on materials before it.
The Supreme Court held that Cash book of assessee having been accepted, and deponents not having been examined, these could not have been challenged by the Revenue and there was no justification for accepting the explanation of assessee in part and treating 30 notes out of 61 notes of Rs.1,000/- denomination as income from undisclosed sources. [Corresponding to s. 23 of the Indian Income-tax Act, 1922](A.Y.1947 – 48)
Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 (SC)
16. S. 143(3) : Assessment (Benami transactions) – the unit ‘P’ belongs to assessee and income of such unit is income of the assessee. So the income of the unit ‘P’ should be clubbed with the income of the assessee.
Assessee filed returns of his daughter declaring income derived from a fabrication unit ‘P’. He stated that daughter was deriving income from unit ‘P’. She was married in year 1994 and after marriage she could not give personal attention and executed power of attorney in Assess’s favour to run said unit. The daughter had purchased said unit from her mother on payment of Rs.10,000/- and executed a promissory note of Rs.60,000/- as security in favour of her mother. The Unit was a separate small scale unit under Director of Industries and had got licence under sales tax department. The A.O. clubbed income of daughter derived from unit with income of assessee on plea that income declared by daughter belonged to assesse. Since it was apparent from record that unit was neither owned by daughter nor by wife, it would have to be held that unit was benami property of assessee and income of such unit was income of assesse. Therefore income of unit was rightly clubbed within income of assesse. (A.Y.1992 – 1993 to 1997 – 1998)
Sri SuruBhaskarRao vs. CIT (2016) 386 ITR 419(Orrissa)(HC)
17. S. 145 : Method of accounting – Valuation of stock- Survey-Stock found less than the stock shown in trading account-Addition as unaccounted sale was not justified.[S.133A]
Closing stock found during survey was found less than closing stock shown in trading account. This, according to Assessing Officer, proved shortage of stock and unaccounted sales. On facts addition made by Assessing Officer was totally uncalled for.
Safari Bikes Ltd. v. JCIT (2014) 33 ITR 665 / 166 TTJ 216 / (2015) 67 SOT 257 (Chd.) (Trib.)
18. S. 147 : Income-escaping assessment – If there is entry in account books of assessee which shows receipt of sum on conversion of high denomination notes – failed to explain source of said money, department was justified in treating value of said high denomination notes as income.
The assessee was the owner of several collieries-coal fields and was also a contractor for raising coal. For the A.Y. 1946-47, the assessment of the assessee was completed. Subsequently, the ITO reopened the assessment on finding that the assessee was in possession of some high denomination notes. The assessee contended that for conducting the business and payment to labour he had to pay every week in thousands; that as he did not get payment for work done every week he had to keep large sum of money to meet emergency and thatit was neither profit nor part of profit, it was very floating capital for purpose of conducting business. He also stated that he had accounts with India, at some banks, but added that he did not remember exactly from which bank the notes came into his possession as his transactions were frequent. The ITO pointed out that the business of the assessee was large and the withdrawals from the various banks were large and frequent, he had not maintained a central account showing withdrawals from the banks and remittances made to his various businesses, and that none of the books maintained by the assessee, and produced by him, contained a bank account. The ITO found a discrepancy in the statements filed by the assessee. He, accordingly, treated the high denomination notes as profits from some undisclosed source and assessed them as assessable income. On appeal, the AAC as well as the Tribunal confirmed the order of the ITO.
The Honourable High Court had taken a view that, there were materials to show that the value of the High denomination notes not form part of the cash balance, and the source of money not having been satisfactorily proved, the department was justified in holding it to be the assessable income of the assessee from some undisclosed course. The same has been confirmed by the Supreme Court. (Corresponding to s. 34 of the Indian Income-tax Act, 1922](AY. 1946 – 1947)
Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC)
19. S. 271(1)(c) : Penalty – For concealment of income – Assessee declared on 19-1-1978 five high denomination notes of Rs.10,000/- each acquired from certain bank – On enquiry bank denied having issued such notes – Assessment was completed on a total of Rs.60,000 rejecting assessee’s explanation and penalty u/s.271(1)(c) was levied. Tribunal cancelled penalty on ground that explanation of assessee was rejected merely on plea that certificate from bank was dated 9-1-1979 as against declaration on 19-1-1978. In fact no certificate was filed but letter issued by bank was dated 9-1-1979 – Since order was passed by Tribunal merely on one statement and real factual position was not kept in mind, Tribunal was unjustified in cancelling penalty.
In the present case, assessee declared five high denomination notes of Rs. 10,000 each acquired from certain bank. On enquiry bank denied having issued such notes. Assessment was completed on a total of Rs. 60,000 rejecting assessee’s explanation and penalty under section 271(1)(c) was levied. Tribunal cancelled penalty on ground that explanation of assessee was rejected merely on plea that certificate from bank was dated January 9, 1979 as against declaration on January 19th, 1978. In fact no certificate was filed but letter issued by bank was dated January 9, 1979. Delhi HC held that tribunal was not justified in cancelling penalty on one statement and real factual position was not kept in mind. It was held that “Tribunal has not kept in view the real factual position and was not justified in cancelling the penalty. We may note that there was submission made by the assessee before the Tribunal that Commissioner, Delhi-II had considered that there was no concealment or misrepresentation and the prosecution case was to be withdrawn. No material seems to have been placed before the Tribunal to test the correctness of the said stand”. (A.Y. 1978 – 1979)
CIT v. Allied International Product Ltd. [2002] 120 Taxman 589 (Del)(HC)
20. S. 271(1)(c) : Penalty – For concealment of income –Addition made to income of assesse u/s. 69A and also levied a penalty u/s. 271(1)(c) on ground that though assessee was in possession of high denomination notes, it had not recorded same in books of account maintained by it and had failed to offer any explanation about nature and source of acquisition of money. assessee was found to be in possession of said high denomination notes, same did not have any representative value as RBI had refused to honour said notes when tendered for exchange, it could not be said that assessee was in possession of unexplained money warranting levy of penalty.
In the present case, assessee was found in possession of unexplained money in form of high denomination notes, which had ceased to be legal tender and had no value in market at all in terms of Ordinance issue by Government in 1978. Upon additions u/s 69A made by AO for unexplained money and penalty levied u/s 271(1)(c), Bangalore ITAT held that “Since assessee was found in possession of unexplained money in the form of high denomination notes after these notes had ceased to be legal tender, addition under s. 69A is unsupportable and question of levying penalty under s. 271(1)(c) cannot arise.”(A.Y. 1978 – 1979)
CIT vs. Andhra Pradesh Yarn Combines (P) Ltd.(2006) 282 ITR 490 (Ker.)(HC)
21. S. 271(1)(c) : Penalty – Concealment – Assessee disclosing particulars of income and surrendering entire amount in return duly filed. Penalty cannot be levied.
Where income surrendered by assessee during survey had been shown by it in its regular income-tax return filed within prescribed time, penalty could not be imposed upon it u/s. 271(1)(c). (A.Y. 2003 – 2004)
CIT vs. SAS Pharmaceuticals (2011) 335 ITR 259 (Del.)(HC).
22. S. 271(1)(c): No penalty can be levied solely on the basis of admission made during survey if there is no corroborative evidence & no fault is found with the return of income
Mere admission by the assesseee in the statement given during the course of the survey itself cannot be a conclusive piece of evidence, unless such a surrender is corroborated by any evidence or material discovered during the course of the survey proceedings or by enquiry thereafter. Hence, penalty cannot be levied solely on the basis of admission made during survey.
ACIT vs. Crescent Property Developers ITA No. 2770/M/2012, Dt. 19/6/2014. And ShriDilip M. Shah Mumbai vs. ACIT ITA 4413/Bom/98 A.Y. 1994-95 dt. 25/1/1999.
23. Constitutional validity – High Denomination Bank Notes (Demonetisation) Act, 1978 and Articles 19 and 31 of Constitution of India
Appellants challenged constitutional validity of impugned Act on ground that it extinguished debts due and owing from Reserve Bank to holders of high denomination bank notes which violated Articles 19 (1) (f), 19 (1) (g) and 31. Object of impugned Act was to avoid menace of unaccounted money. And said object was public purpose.
The Supreme Court observed and held that Act not violative of Article 31 as property being compulsorily acquired for public purpose. Impugned Act not violative of Articles 19 (1) (f) and 19 (1) (g) as after compulsory acquisition of property under impugned Act rights of appellants stood extinguished and question of unreasonable restrictions on exercise of rights cannot arise therefore High Denomination Bank Notes (Demonetisation) Act, 1978 Act is a valid legislation.
JayantilalRatanchand Shah, DevkumarGopaldasAggarwal and others Vs. Respondent: Reserve Bank of India and others. AIR 1997 SC 370
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