- (1.) THE Tribunal, Allahabad, has referred the following question of law under s. 256(2) of the IT Act, 1961, hereinafter referred to as "the Act", for opinion to this Court : "Whether, the penalty imposed is legally sustainable in view of the evidence already furnished -
(2.) THE present reference relates to the asst. yr. 1977 -78 in respect of the penalty proceedings under s. 271(1)(c) of the Act.
(3.) BRIEFLY stated the facts giving rise to the present reference are as follows : The applicant is being assessed to income -tax in the status of an individual. He was a partner in the firm, M/s Sunder some assets including cash of Rs. 57,000 were found. At the time of search, the statement of the applicant was also recorded. In that statement he had stated that the amount has been taken by him from his relatives and friends. More specifically, he had stated that a sum of Rs. 2,000 belongs to his son, Sri Pritam Singh, Rs. 2,000 belongs to M/s Sunder Timber Mart and Rs. 400 belongs to his daughter -in -law, Smt. Surinder Kaur. He did not disclose the name of any such relatives and friends for the reasons best known to him. He also did not state that the money which has been found at the time of search had been given to him by his friends and relatives for being invested in the money -lending business of the firm rather it was stated that the money has been taken from them. In the original assessment proceedings the amount of Rs. 48,000 was treated as unexplained income which has been upheld upto the stage of the Tribunal. Proceedings under s. 271(1)(c) of the Act had been initiated by the assessing authority and after considering the explanation he had imposed a sum of Rs. 20,020 as penalty. Feeling aggrieved, the applicant preferred an appeal before the CIT(A). Before the CIT(A) it was contended that the amount represented the deposits made by the persons mentioned in the assessment order and there is no doubt about the identity of such persons. It was also pointed out that the cash credits were disbelieved for the reason that the depositors have made the advances in cash, because the law does not require that a person should not keep his earnings in cash and the amount had been returned to the depositors through cheques. It was further stated that the depositors who have filed their affidavits, have not been cross -examined and, therefore, the penalty imposed cannot be sustained. The CIT(A) had accepted the plea raised by the applicant and cancelled the penalty. Feeling aggrieved, the Revenue preferred an appeal before the Tribunal. The Tribunal after considering the various submissions made on behalf of the respective parties and taking into consideration the material on record restored the penalty order on the following reasons : "We have carefully considered the rival contentions as also the various documents on record and the case law cited before us. On consideration of the entire facts of the case we are of the opinion that the appeal must succeed. As mentioned above, the addition of Rs. 48,000 already stands confirmed in the quantum proceedings. In the penalty proceedings, no fresh evidence or additional circumstance has been brought on record and in the circumstances, it would be reasonable to conclude that the assessee has failed to discharge the onus which lies on him, and the levy of penalty is justified. The order of the ITO indicates that the assessee's statement was recorded on the date of search at 8 a.m. and again at 6 p.m. With regard to the cash found during the search, he had stated that a sum of Rs. 2,000 belongs to his son, Sri Pritam Singh, and Rs. 2,000 belongs to M/s Sunder Timber Mart and Rs. 400 belongs to his daughter -in -law, Smt. Surinder Kaur, and the balance was taken by him from his relatives and friends. He failed to disclose the names of such relatives and friends for the reasons only known to him. It is also worth mentioning that at that time it was not stated that the amount has been given to him by his friends and relatives for being invested in the money -lending business of M/s Sunder Timber Mart, rather it was stated that the money has been taken by him. No reason has been advanced as to why he did not disclose the names of his relatives and friends who have deposited the amount at the time when his statement was recorded on the date of search. The only explanation lies in the fact that the amount had not been so deposited with him and the story that it has been so deposited has been made up subsequently in consultation with the alleged depositors. While analysing the evidence we have to keep in mind that as per the explanation which is being offered by the assessee, three depositors, S/Shri Satya Pal Bhatia, Raghubir Singh and Shiv 1976, i.e., only a day earlier before the search. In the circumstances, if the deposits were genuine, they were fresh in the memory of the assessee and he should have disclosed the names of the depositors while his statement was being recorded as he had disclosed the names of Pritam Singh, Surindar Kaur and M/s Sunder Timber Mart. The fact that the that firm can be of no assistance to the assessee, for the simple reason that the amount in question was found on 4th the depositors are men of meagre income and the so -called deposits are not genuine. In the penalty proceedings we see no reasons to take a contrary view. We have looked into the statements of the depositors which had been recorded by the ITO. All the depositors were having bank account. Shri Satya Pal Bhatia who claims to have deposited Rs. 20,000 is a retired official and has stated that he had withdrawn the money from his bank account on different dates. The money was withdrawn by him for the purposes of his daughter's marriage as he could need the money at any time. He has no source of income except pension. Similarly, Shri Raghubir Singh who claims to have deposited Rs. 20,000 is a heart patient and is not engaged in any business or vocation. Previously he was having a monthly income of about Rs. 250. Shri Shiv Gopal Gupta claims to have deposited Rs. 10,000. He is an assistant to an advocate on a monthly salary of Rs. 250. Besides he also claims annual earnings around Rs. 3,000 by part -time accounting work. Shri Sita Ram Gupta claims to have deposited Rs. 8,000. He is a retailer in Hawan Samagri. He is maintaining a bank account but the deposit like that of his son, Shiv Gopal Gupta, was not routed through banks and the amount is said to have been advanced from the past savings." We have heard Sri Satish Mandhyan, learned counsel for the applicant, and Sri Shambhoo Chopra, learned standing counsel for the Revenue.;