Per Shri Ram Rattan, Accountant Member - This appeal by the assessee arises out of the order of the AAC sustaining penalty of Rs. 22,600 imposed by the ITO under section 271(1) (c) of the Income-tax Act, 1961 (the Act) relating to the assessment year 1976-77.
2. The facts briefly stated are that during the course of examination of account books of the assessee, it was noticed by the ITO that the assessee introduced a sum of Rs. 21,600 in his cash book on 17-5-1975, under the narration drawn from Punjab and Sind Bank. The ITO on comparison with the accounts of Punjab and Sind Bank noticed that no such amount was withdrawn from the bank. On further examination of the accountant books, he noticed that the assessee withdrew a sum of Rs. 21,600 from the books of account on 17-6-1975 again under the narration to Punjab and Sind Bank. When the bank pass book of the assessee was examined by the ITO, it was found that the assessee did not deposit this amount of Rs. 21,600 in the bank on 17-6-1975 as mentioned in the cash book. The ITO therefore, came to the conclusion that it clearly established that the assessee first introduced its own unexplained money on 17-5-1975 and then withdrew the same on 17-6-1975 from the cash book under the factious name of Punjab and Sind Bank in both the cases. It was stated before the ITO by the assessee in its letter dated 17-5-1975 that out of cash introduced on 17-5-1975 amounting to Rs. 21,600 the peak amount utilised from 7-5-1975 to 17-6-1975 was only Rs. 10,876. It was further urged that addition of Rs. 10,000 was made in the last year while finalising the assessment. The ITO had not accepted the above explanation. According to him, the amount introduced on 17-5-1975 of Rs. 21,600 under the garb of drawn from the Punjab and Sind Bank remained unexplained. He, therefore, treated the amount of Rs. 21,600 as then assessees income from undisclosed sources in view of the provisions contained in section 68 of the Act. Before the AAC, the assessee did not dispute the facts relating to the cash credit as mentioned in the order of the ITO. It was, however, contended that entries made in the case book in respect of the cash credit of Rs. 21,600 were on account of mistake on the part of accountant who had written the account books. It was also contended that this amount was not required on 17-5-1975 when the said entry was made. The maximum cash which had been utilised out of the said sum of Rs. 21,600 was admitted at Rs. 10,876. It was claimed that the assessee-firm had subsequently disclosed under the Voluntary Disclosure Scheme a sum of Rs. 10,000 for the accounting period relevant to the assessment year 1975-76 on 30-12-1975 and the sum of Rs. 7,000 after the payment of taxes, etc., was credited in the account books on 18-1-1976. It was, therefore, urged that the sum of Rs. 10,000 was available with the assessee-firm outside the books of account when the said sum of Rs. 10,876 was utilised on 30-5-1975 out of the said cash credit. It was, therefore urged that no addition on account of unexplained cash credits should have been made. These submissions did not find favour with the AAC who upheld the addition made by the ITO. The assessee carried the matter in appeal before the Tribunal who vide its order dated 28-11-1981 in IT appeal No. 210 of 1980 has also upheld the addition made by the ITO and sustained by the AAC. The observations of the Tribunal in paragraphs 7 to 10 are reproduced below for ready reference : "7. After taking into consideration the rival submissions and very careful perusal of facts stated at different stages, somehow differently, also we are unable to interfere in the finding of the Appellate Assistant Commissioner. The slippery grounds which are taken from time to time by the assessee not only causes the suspicion but makes us of firm opinion that the explanations given by the assessee in respect of Rs. 21,600 finally before us are also false. As above stated, the learned counsel for the assessee could not controvert the fact that Punjab and Sind Bank had nothing to do with the said amount of Rs. 21,600. Before us he did not reiterate the submissions made earlier before the Income-tax Officer that it was result of mistake of one keeping the accounts nor did he highlight that cash was not needed when it was introduced, though from careful perusal of the Appellate Assistant Commissioners order it is apparent that it was needed during the one month period it stayed with the assessee as per book entries, though partly little more than half the amount introduced. From perusal of copy of voluntary disclosure made, we find that on 31-3-1977 Rs. 10,000 were disclosed by the assessee, though his status of declarant is not available on the said copy but it seems to be in respect of the assessee-firm itself as permanent account No. given is 6914 on the said declaration and also as borne out by record. Undoubtedly the said amount has been shown as cash. As per observations of Income-tax Officer that the peak amount utilised was to the extent of Rs. 10,876 on 30-5-1975 there is no dispute. We are in agreement with the observations of the Appellate Assistant Commissioner that a mistake of the employer could not further the case of the assessee because it was a sum of Rs. 10,876 already utilised out of the said cash credit.
Regarding co-relating a sum of Rs. 10,000 to voluntary disclosure, if it were so, at least in the course of voluntary disclosure the assessee could voluntarily come forward as long as on 31-3-1977 that this amount was partly in favour of bogus credit in the name of Punjab and Sind bank because the assessment order is dated 7-3-1979.
8. Regarding utilisation of intangible additions, we are convinced with the arguments of the learned department al representative. It is not a case where this contention could have been accepted by the revenue on concession. To us, it seems to be a cock and bull story on different occasions with different versions with the only aim that the said credit of Rs. 21,600 should be got treated as genuine. The reliance of the learned counsel for the assessee on the case of CIT v. Ram Sanehi Gian Chand  86 ITR 724 (Punj. & Har.) is correctly placed in respect of the first finding of their Lordships that the Tribunal had the discretion to allow the new contention raised before it under the power to be spelt out from rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. Regarding the reliance on the second part of the order that the assessee was entitled to take advantage of the past intangible additions to explain the source of what was considered by the Income-tax Department as income from undisclosed sources, we are afraid it is not a clear case which could derive some breath from this finding. Besides, the substantial difference in facts in the case of Ram Sanehi Gian Chand (supra) and the instant case, it was not an ordinary party in whose name the credit was introduced but a bank and that entry too was squared up within a short span of time, i.e., one month, which could clearly neither effect the opening balance nor the closing balance. As per latest legal pronouncements, the revenue is also supposed to unvail the affairs and find out the truth. When we go through the Supreme Court Judgment in the case of Anantharam Veerasinghaiah & Co. v. CIT  123 ITR 457, at the outset we find that it supports the contention of the assessee when the head note is read to start with but the time the second part is read, the reliance of the learned departmental representative on this case is found to be correctly placed, as is apparent from the following observations of their Lordships : ... that though the addition to the book profits in the earlier year could constitute a fund from which the assessee might draw subsequently for meeting expenditure or introducing amounts in the account books, the Tribunal erred in law in confirming itself to the fact that an intangible addition had been made to the assessees book profits in the earlier year and that a part of the amount remained available to the assessee thereafter. The Tribunal had to consider, from an overall consideration of all relevant facts and circumstances, whether the unexplained cash credits would be reasonably attributed to the pre-existing fund of concealed income or they were reasonably explained by reference to the concealed income earned in the relevant year...
Instant is a case where when we consider from an overall consideration of all the relevant facts and circumstances whether unexplained cash deposit and cash credit could reasonably be attributed to the pre-existing funds of concealed income or they are reasonably explained by reference to the concealed income earned in the relevant year, we find the reply emanating from the fact is negative. All the relevant facts and circumstances in this case on this issue go against the assessee.
9. Before parting with the issue, we also find that intangible additions are made in the case of the firm, a registered partnership firm where division of profits in favour of intangible additions is a very big presumption because it is a case of registered partnership firm and the credit under the circumstances in the case of firm could not be explained out of such additions and also in the light of the circumstances as discussed above.
10. The assessees contention is rejected in respect of this ground of Rs. 21,600 introduced falsely in the name of Punjab and Sind Bank on 17-5-1975." 3. The ITO also initiated penalty proceedings under section 271(a) (c) and imposed penalty of Rs. 22,600 which is 150 per cent of the tax sought to be evaded against minimum penalty imposable at 100 per cent and maximum penalty at 200 per cent. The AAC upheld the penalty imposed by the ITO. The submissions before the AAC were that - (a) the entries in the cash book regarding the amount of Rs. 21,600 made on 17-5-1975 and 17-6-1975 were due to a bona fide mistake on the part of the persons maintaining the books of account; (b) The assessee had disclosed a sum of Rs. 10,000 on 31-12-1975 under the Voluntary Disclosure Scheme. This amount of Rs. 10,000 was available with the assessee on 17-5-1975. Further an amount of Rs. 10,000 added in the total income of the assessee for the assessment year 1975-76 was also in hand. The amount of Rs. 21,600 introduced in the books of account on 17-5-1975, therefore, comprised of these two amounts of Rs. 10,000 each. The assessee was, therefore, entitled to take credit for these two amounts; and (c) No deliberate concealment of particulars on the part of the appellant was established by the ITO. Therefore, no penalty under section 271(1) (c) could be imposed. Reliance was placed on the decision of the Honble Supreme Court in the case of CIT v. Anwar Ali  76 ITR 696.
4. The AAC rejected all the above contentions for the following reasons : The assessee introduced the amount of Rs. 21,600 on 17-5-1975 in the guise of fictious withdrawal from its account with the Punjab and Sind Bank Ltd. and again withdrew the amount from the books of account under the same caption. This was not the real source of the credit for the purpose of withdrawal. These fictitious entries, therefore, establish that the entries in the case book were bogus, and the Punjab and Sind Bank had nothing to do with the amount of Rs. 21,600 either on 17-5-1975 or 17-6-1975. The assessee, therefor, deliberately made these entries with the mala fide intention of concealing the true particulars of its income. According to the AAC, this showed guilty and contumacious conduct which resulted in deliberately furnishing of inaccurate particulars of its income. He, therefore, held that the judgment of the Honble Supreme Court in the case of Anwar Ali (supra) was not applicable to the facts of the case. Regarding that the mistake was a bona fide one on the part of the persons who maintained the books of account, the AAC observed that this was already found to be incorrect, as the assessee itself admitted that funds to the extent of Rs. 10,876 were utilised out of these funds introduced in the books of account and this amount could be so utilised only when it was introduced earlier. it was, therefore, not merely an entry by mistake but actual cash was introduced. Regarding the explanation that these were out of voluntarily disclosed income of Rs. 10,000 and intangible addition of Rs. 10,000 made in the assessment year 1975-76, the AAC held that the narrations under which the amount was introduced and withdrawn belie the explanation of the assessee. Further, there is no basis for this explanation inasmuch as no co-relation between the amount disclosed and the amount introduced in the books of account was available. He also observed that the assessee was a partnership concern. Whatever funds representing the intangible additions in the earlier years may have been, the same must have been divided amongst the partners, and they must have taken them away. Finally, he observed that the clear and uncontroverted position that emerged from the material facts was that the assessee was guilty of contumacious conduct which consciously and intentionally aimed at furnishing of inaccurate particulars of its income. He, therefore, held that the penalty under section 271(1) (c) was clearly exigible. He confirmed the penalty imposed by the ITO as such.
5. The assessee is aggrieved against the above order of the AAC and is in second appeal before the Tribunal. At the outset, Shri D. S. Gupta, the learned counsel for the assessee, pointed out that in the assessment order passed by the ITO on 7-3-1979 under section 143(3) of the Act, while initiating penalty proceedings, he observed as under : "Penalty notice under section 274, read with section 271(1) (c), for concealing the particulars of his income or furnishing inaccurate particulars of such income has separately been issued." He urged that as per the notice, the charge was that the assessee had concealed the particulars of income or furnished inaccurate particulars of such income. He submitted that initiation of proceedings under section 271(1) (c) and the order passed by the ITO were illusory inasmuch as the ITO was not sure as to whether the charge was for concealing the particulars of income of for furnishing inaccurate particulars of such income. According to him, unless a specific charge was framed, the assessee could not explain its conduct. He, therefore, urged that the initiation of proceedings was bad in law and the penalty order passed in the same terms was also bad ab initio. He, therefore, urged that the AAC in such circumstances was not justified in holding that the assessee had furnished inaccurate particulars of its income.
He referred to the Explanation below section 271(1) (c) and urged that the controversy was as to whether the addition or disallowance were on account of concealment of the particulars of the income or on account of having furnished inaccurate particulars of such income or it was on account of both. He further urged that in view of the above Explanation, the ITO could give a direction in his order under section 143(3), after his satisfaction, to issue a notice under section 274, read with section 271(1) (c) of the Act, for concealing the particulars of income and not for furnishing inaccurate particulars of such income.
He also urged that in view of the deeming provisions as contained in part (B) of the said Explanation the charge had to be specific and not illusory as in the present case. Therefore, the penalty so levied was void ab initio. The learned counsel for the assessee also urged that a question might arise that if at all the additions and disallowances are to be covered by the expression concealment of particulars of income in view of part (B) of Explanation 1, the alternative charge of furnishing inaccurate particulars of income as mentioned in section 271(1) (c) will become redundant. Lastly, he urged that on the basis of section 68, the amount represented in the case credit of Rs. 21,600 could be deemed to be the income of the assessee but it could not be treated as such for purposes of levying penalty under section 271(1) (c). For this proposition, he relied on the decision of the Calcutta High Court in CIT v. Bhuramal Manikchand  130 ITR 129.
6. Shri R. K. Bali, the learned senior departmental representative, on the other hand, contended that in the present case, the case of the revenue was covered under both the situations, i.e., the assessee concealed the particulars of income and also furnished inaccurate particulars of such income. He submitted that firstly, the assessee did not disclose in the return or the documents accompanying thereto that it had introduced fictitious cash credit of Rs. 21,600 in the garb of withdrawal from the Punjab and Sind bank. It was only on scrutiny of the books of account by the ITO, he detected such a cash credit with fictitious narrations as withdrawn from the bank and deposited in the bank. He further submitted that even when called upon to explain the source thereof, the assessee did not come forward with the true state of affairs. It tried to furnish contradictory explanations one after another. At one time it was stated that it was on account of mistake of the accountant that wrong entry was made. At another time it was stated that it was out of voluntarily disclosed income of Rs. 10,000 and out of intangible additions of the past. Even in the explanations the facts furnished were inaccurate. He, therefore, urged that the initiation of proceedings by the ITO and the subsequent issue of notice by him were not illusory. They contained positive charges of concealing the particulars of income and also furnishing inaccurate particulars of income as contemplated in clause (c) of section 271(1). He also contended that in this case, neither the ITO nor the AAC invoked Explanation 1 below section 271(1) (c). On the contrary penalty was imposed by the ITO under the main provisions of section 271(1) (c). He urged that the ITO had positively provided the contumacious conduct on the part of the assessee and also that the assessee had deliberately attempted to conceal its income and also to furnish inaccurate particulars of such income as contemplated in the main provisions of the Act. He urged that Explanation I will come to the rescue of the ITO only when he was unable to prove that there was deliberate and calculated act on the part of the assessee to conceal income. In regard to the contention on behalf of the assessee that no penalty could be imposed for deemed income under section 68, he relied on the decision of the Supreme Court in CIT v. Smt. P. K. Kochammu Amma Peroke  125 ITR 624 wherein it was held that the amounts representing the shares of the spouse and the minor daughter were not shown in the return of income but required to be included under section 64 of the Act attracted the applicability of section 271(1) (c). It was also a deeming provision. He also relied on the judgment in 103 ITR 404 (Ori.) (sic.). Reliance was also placed on the judgments of the Honble Punjab and Haryana High Court in CIT v. Behari Lal Pyare Lal  107 ITR 587. Hindustan Tools Mfg. Co. v. CIT  102 ITR 174 and CIT v. Aya Singh Ishar Singh  92 ITR 182 where non-disclosure of profits under section 41(1) of the Act was held to be concealment of income. He also referred to another decision of the Honble Punjab and Haryana High Court in the case of Ambala Electric Supply Co. Ltd. [IT Reference No.64 of 1976, dated 3-2-1981] upholding the penalty for concealment of deemed income under section 41(1).
7. We have very carefully considered the rival submissions. It may be pointed out that the issue regarding the charge being illusory under similar circumstances came up for consideration before the Chandigarh Bench of the Tribunal in the case of Gulati Stores [IT Appeal No. 354 of 1982] for the assessment year 1977-78. The contention of the assessee was negatived by the Tribunal vide its order dated 29-3-1984.
Relevant extract from the said order is reproduced below : "Reliance on the case of CIT v. Vegetable Products Ltd.  88 ITR 192 (SC) is also misplaced because it is not a question of two interpretations in the instant case. The main spring being the cases of Gujarat and Gauhati High Courts, relied upon by the learned counsel for the assessee, was denial of opportunity that once show-cause notice for concealment of particulars of income was served, penalty cannot be levied for furnishing of inaccurate particulars. But it is not so in the instant case. Once the show-cause notice bears both the limbs, viz., furnishing of inaccurate particulars or concealment of particulars, though the words or is there between the two in the statute but it does not mean that in case it is furnishing of inaccurate particulars it cannot be concealment of particulars of income. Sometimes it could be one but often it is both. In this regard, reliance of the learned departmental representative in the case of Rehmat Development & Engg. Corpn. (supra) is correctly placed in which it was held : ... that, in the instant case, the IAC upheld both the charges and so there was no inconsistency between the notice issued by the ITO and the findings given by the IAC. Moreover, the assessee had been given sufficient opportunity to refute both the charges. The facts showed that inaccurate particulars of investments which were furnished was the modus operandi to conceal the real income of the assessee. The imposition of penalty was therefore, valid." We entirely agree with the above conclusions arrived at by the Tribunal. another important thing to be noted is that in the present case, the assessee did not disclose anything about the credit to the Income-tax Department either in the return or in any explanation attached to return. It was therefore, undoubtedly a case of concealing the particulars of income. It was as a result of the scrutiny by the ITO that he detected the deposit. When called upon, the assessee did not come forward with true facts. He tried to explain it by giving explanations which were contradictory to each other. At one stage it was contended that no deposit made and the entries were made due to the mistake of the accountant. When confronted with the situation that the assessee had utilised cash to the extent of Rs. 10,876 then it came forward with the explanation that the assessee had cash of Rs. 10,000 available with him which was subsequently disclosed under the Voluntary Disclosure Scheme in December 1975 and again intangible additions of similar amounts were made in the past which were also available with the assessee. It is, therefore, a case where the assessee concealed the particulars of his income and also furnished inaccurate particulars of such income. Then we have to consider whether the assessee had any doubt in its mind about the charge levied against it so as to make it illusory. Show-cause notice as to why penalty under section 271(1) (c) should not be imposed was duly served upon the assessee. The assessee never raised an objection that the charge was illusory. On the contrary it furnished the explanation which clearly shows that the assessee fully understood as to what was the charge. Again, whether it is concelment of prticulrs of income or furnishing inaccurate particulars of such income, the end result in both the cases is suppression of income which was otherwise includible in the total income of the assessee. we, therefore, do not find any merit in the contention made on behalf of the assessee that the charge was illusory which vitiated the initiation of the penalty proceedings.
8. Another important issue to be considered is, when addition had been made by taking resort to the provisions contained in section 68 whether penalty under section 271(1) (c) can be imposed in relation thereto.
The submission of the learned counsel for the assessee was that cash credit was not an income but it was only because of the deeming provisions of section 68 that this was treated to be the income of the assessee and, therefore, no penalty under section 271(1) (c) could be imposed in respect of such deemed income. This issue is squarely covered by the judgment of the Orissa High Court in the case of CIT v.Ganpatrai Gajanand  108 ITR 403. Their Lordships of the Orissa High Court held that there was no distinction between the income arising on account of section 68 and income earned otherwise. It is further held that the definition of income earned otherwise. It is further held that the definition of income is inclusive. Therefore, an amount which is deemed to be an income by operation of law is also income to which the provisions of section 271 will apply. The Honble Punjab and Haryana High Court in Behari Lal Payare Lals case (supra), Hindustan Tools Mfg. Co.s case (supra) and Aya Singh Ishar Singhs case (supra) has also held that deemed income under section 41(1) is also liable to penalty under section 271(1) (c).
In the case of Ambala Electric Supply Co. (supra), their Lordships of the Punjab and Haryana High Court have held that penalty under section 271(1) (c) is also attracted where the income is included in the total income of the assessee in view of the deeming provisions contained in section 41(2). According to section 41(2), where any building, machinery, plant or furniture owned by the assessee and used for the purposes of business or profession is sold, discarded, demolished or destroyed, and the moneys payable in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceed the written down value, so much of the excess as does not exceed the difference between the actual cost and written down value, shall be chargeable to income as income of the business or profession of the previous year in which the moneys payable for the building, machinery, plant or furniture became due. The effect of these provisions is that the depreciation allowed earlier on the assets referred to above is deemed to be the income of the year in which such asset is sold, etc., to the extent it was allowed in earlier years. In fact there is no real income but by operation of law it is taken as assessees income equivalent to the amount of depreciation already allowed. Their Lordships have held that where it is treated as income even by virtue of the deeming provisions, it has to be declared by the assessee in the total income. Failure to do so will attract penalty under section 271(1) (c). Income has been defined under section 2(24) of the act. The definition is inclusive and not exhaustive. It shall, therefore, include income whether real or deemed which are assessable under the Income-tax Act. There is no dispute that the case credits are assessable as income under the deeming provisions of section 68. In the ratio of the decisions of the Honble Punjab ns Haryana High Court and of the Orissa High Court referred to above, we are of the opinion that provisions of section 271(1) (c) are attracted in cases of deemed income assessed under section 68. We, therefore, do not find any merit in this contention made on behalf of the assessee as well.
9. Another point raised by Shri Gupta, the learned counsel for the assessee, was that part (B) of Explanation 1 below section 271(1) (c) was not attracted in this case. The contention of Shri Bali, the learned departmental representative was that Explanation was not invoked by the ITO as it was held by the authorities below that the assessee had deliberately concealed the particulars of his income and, therefore, penalty was imposed under the main provisions of the Act. We agree with Shri Bali on this point. Where the penalty has been imposed under the main provisions of the Act, it is not necessary to invoke the deeming provisions by the ITO. The ITO has clearly proved that the assessee had made false entries in the books of account by mentioning the name of the bank when actually no transactions were made with the bank. In the garb of deposit and withdrawal from the bank, the assessee introduced its own money which was held back from the department. We also find merit in the submissions made on behalf of the revenue that the assessee has given contradictory explanations one after another which clearly established the contumacious conduct on the part of the assessee.
10. Another submission on behalf of the assessee was that credit for the income voluntarily disclosed and also intangible additions in the past should have been given by the ITO. We do not find any merit in this contention as well. There is no co-relation between the income introduced in the books of account and the voluntarily disclosed income as well as intangible additions in the past. The onus is upon the assessee to co-relate the same as it is alleged by it. We also notice that even the intangible additions and the voluntarily disclosed income put together are of Rs. 20,000 whereas the cash deposit was at Rs. 21,400. There is no explanation for the balance amount of Rs. 21,400.
This clearly shows that the deposit of Rs. 21,400 was not out of these intangible additions and the income voluntarily disclosed subsequently.
This contention on behalf of the assessee is alsos rejected. In view of the above discussions, we have no hesitation in confirming the order of the AAC sustaining penalty under section 271(1) (c).