Per Shri P. S. Dhillon, Judicial Member-Revenue has preferred this appeal against the order dated 13-3-1984 of Shri H. S. Dhooria, Commissioner (Appeals), Amritsar, who allowed the appeal against the order dated 20-3-1981 of Shri R. K. Sharma, ITO.2. The assessee is a registered firm. The assessment year involved is 1975-76. The business of the assessee is purchase and sale of yarn.
2.1 The relevant facts, in brief, are that the assessee filed the return of income for the assessment year 1975-76 declaring an income of Rs. 1,39,033. The ITO initiated penalty proceedings under section 271(1) (c) of the Income-tax Act, 1961, (the Act) before the completion of the assessment at Rs. 85,090. The break up of the additions made by the ITO is as under : 3. The assessee went in appeal before the AAC, who reduced the income by Rs. 6,480 vide his order dated 10-1-1980. He also reduced the addition of Rs. 33,600 (supra) made by the ITO for the reasons stated in his order in quantum of appeal.
3.1 In further appeal, the assessee contested the remaining additions in the Tribunal. The Tribunal deleted the addition of Rs. 32,025 in respect of 350 kgs. of yarn mentioned in (c) above. However, the Tribunal sustained the addition for the cost of 50 kgs. (supra) at Rs. 5,400 as well as woollen yarn pledged on 31-3-1975 to the Bank of Baroda, which the Tribunal held had come out of the stocks pertaining to the period from 5-6-1974 and 9-12-1974. The Tribunal sustained an addition of Rs. 5,400 (supra) for the reasons mentioned in its order in paragraphs 5 and 6, while the addition of Rs. 27,120 was confirmed for the reasons in paragraphs 3 and 4 of its order. However, the ITO initiated the penalty proceedings under section 271(1) (c) /274 of the Act and thereby issued notice on the assessee to explain that why the assessee should not be penalised for concealment of income or for furnishing inaccurate particulars of income. The assessee offered the explanation which was rejected by the ITO, for the reasons mentioned in his order, and, therefore, he imposed a penalty for a sum of Rs. 64,545 on the grounds mentioned in his order, inter alia, that the quantum of penalty to be computed with reference to the law prevailing on the date when the act was committed, i.e., the date on which the return concealing the income was filed. Reliance was placed on the decisions in the cases of CIT v. Ramchand Kundanlal Saraf  98 ITR 474 (MP) and CIT v. Bhan Singh Boota Singh  95 ITR 562 (Punj. & Har.).
Accordingly, he calculated the amount of penalty on concealed income as upheld by the AAC amounting to Rs. 64,545 and maximum penalty at 100 per cent of concealed income was worked out to Rs. 64,545.
4. In appeal, the AAC deleted it and thereby allowed the appeal of the assessee for the reason mentioned in his order in paragraph 8 and the same is reproduced hereinafter : "I have given my careful consideration to the aforesaid facts and circumstances of the case and I am inclined to agree with the authorised representative that this would not be a fit case for imposition of the penalty under section 27(1) (c) as had already been held by my predecessor and now even under Explanation to section 27(1) (c). No doubt, the said Explanation raises a presumption against the appellant-firm but the said presumption would be rebuttable. A perusal of the sequence of events in this case do indicate that the appellant firm had tried to hoodwink the banking authorities inasmuch as they had passed on art silk yarn as woollen yarn for pledging and would certainly be liable for any of the consequences therefor in their relationship with the bank under the relevant legal provision. But the question to be considered under the Act will be as to how for the said hoodwinking has resulted in concealment thereof. In this regard, I am unable to agree with the ITO that merely because the art silk yarn had been passed of as woollen yarn it has resulted in any earning of income or for that matter the concealment thereof. The question of discharging of the onus will have, therefore, to be considered in this context that is it was for the appellant-firm to show that the difference in the returned income and assessed income did not arise on account of any fraud or gross negligence on their part provided it is conclusively proved to be their income. As stated earlier, no doubt, the addition has been made in the total income on account of the variation in the information given in the bank statement and net stock position with the appellant-firm, yet on the basis of the explanation as given it would appear to be doubtful as to whether what was actually pledged in the bank was woollen yarn or art silk yarn, because as per the certificate of the bank, they also could not categorically say as to its actual contents, except that they have simply believed the appellant-firm at the relevant time. No doubt, the appellant-firm has tried to deceive the bank by giving wrong information of course with a view to get extra overdraft facilities yet it was for the bank to properly verify physically the stock actually pledged which they do not appear to have done. That being the position, I am inclined to agree with the authorised representative that the appellant-firm cannot be now charged for the concealment of income of furnishing inaccurate particulars thereof even under the provisions of Explanation to section 27(1) (c)." 5. The revenue being aggrieved for the deletion of the penalty imposed by the ITO has preferred this appeal. Shri S. S. Sud, the learned departmental representative, contends that on the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in cancelling the penalty of Rs. 64,545 imposed by the ITO under section 27(1) (c); that the Commissioner (Appeals) has again erred in concluding without any conclusive material that the addition of the sums of Rs. 27,320 and Rs. 5,400 to the assessees total income as upheld by the Tribunal did not represent income, which was concealed by the assessee within the meaning of the provisions of section 271(1) (c). Reliance is placed on the order of the ITO, as well as on the decision in the case of Shiv Narain Khanna v. CIT  107 ITR 542 (Punj. & Har. ). On the other hand, Shri R. C. Khanna, the learned counsel for the assessee, has raised the preliminary objection that the appeal is time barred. On merits, the learned counsel for the assessee relying upon the order of the Commissioner (Appeals) contends that on the facts and in the circumstances of the case, no penalty is imposable. Reliance is placed on the decision in the case CIT v. Sardar Bhagat Singh  142 ITR 836 (Pat). He further contends that the facts of the case relied upon by the departmental representative are distinguishable with the case of the assessee. He further contends that when the additions made by the ITO which are the basis for imposition of penalty under section 271(1) (c) have been further deleted or reduced by the AAC and the Tribunal, then the addition should not be the basis for imposition of penalty as the additions are there on change of opinion. He further contends that the assessee has explained that yarn pledged to the Bank of Baroda was not woollen yarn, rather it was silk yarn as the assessee has brought on record the entries to this effect in the books of account of the sister concern, which were produced before the ITO and are incorporated in a paragraph 4 of the order of the Commissioner (Appeals) and, therefore, the assessee has proved that the explanation offered by the assessee is satisfactory and, hence, no penalty is imposable on the assessee on account of it.
He further contends that the addition of Rs. 5,400 sustained by the Tribunal, no doubt is there, but it is explained that it is not there on account of contumacious conduct on the part of the assessee.
Reliance is also placed on the paper book from pages 1 to 17. In rebuttal, the learned departmental representative contends that the appeal is time barred by six days, but the same is explained in view of the application dated 15-6-1984 of the ITO. He relies upon it. On merits in rebuttal, he has nothing to add.
6. We have heard the rival contentions and gone through the record before us. First of all, we decide the preliminary issue raised by the learned counsel for the assessee, which is that whether the appeal is time barred by six days.
6.1 The record shows that the impugned order was communicated on 9-4-1984 but the appeal was filed on 15-6-1984, when it was due on 8-6-1984. Thus, the appeal filed is belated by seven days. The ITO filed the condonation application dated 15-6-1984, which was received in the office of the Tribunal on 15-6-1984 along with appeal memorandum stating therein that the appeal was due on 8-6-1984, as the service of the appellate order was made on the Commissioner, Amritsar on 9-4-1984; that complete curfew was imposed in the Amritsar city due to disturbed conditions from 3rd June to 10th June 1984 and the office remained closed; that direction of the worthy Commissioner for preferring the appeal before the Tribunal was received on 13-6-1984 afternoon. On the abovesaid facts, it is, therefore, requested that he delay is under sufficient cause and reason and, therefore, explained. Hence, the same be condoned.
6.2 The record further shows that the Commissioner issued the authorisation under his signature on 2-6-1984. Therefore, the appeal was to be filed on 2-6-1984 or 3-6-1984 in view of the fact that the ITO is local. No doubt, it is stated in the condonation application that the curfew was imposed in the Amritsar city from 3-6-1984 to 10-6-1984, which means that it was lifted on 11-6-1984. Therefore, the appeal must have been filed on 11-6-1984. The explanation of the ITO is that the authorisation was received on 13-6-1984, but for it, there is no proof. No doubt, it is pleaded by the department representative that whatever has been stated in the application by the ITO, it is his statement in view of the fact that the ITO is a Class I Gazetted Central Government Officer and, therefore, whatever he has stated in this application is there in the performance of his duties and as such is proof for sufficient cause or reason. But this contention is not all plausible and, therefore, we reject it. The reason is that the ITO in the income-tax proceeding before the Tribunal is a party and, therefore, he has no better status than that of litigants and that too as the assessee is having, since the assessee is opposite party - the respondent. Article 14 of the Constitution of India says that the parties are equal in the eyes of law. Therefore, the ITO is to prove sufficient cause and reason and whatever is stated in the application is merely contention of the ITO for which proof is needed to prove.
There is no proof furnished by the ITO even at this stage. It is pertinent to note that there is receipt register in each Government office and whatever mail is received in the office, the same is entered into this register. The ITO has not even shown the entries in this register to prove that the authorisation is received by the ITO on 13-6-1984. Furthermore, the ITO has not even verified the contents of this letter, what to say of filing an affidavit to prove this. There is no proof that it was despatched from the office of the Commissioner so belated, i.e., after 2-6-1984. Apart from it, it is the duty of the ITO to file the appeal under the provisions of the Act, and therefore, he is to be vigilant to file it in time. For this purpose, he is to pursue the matter in the office of the Commissioner to have the authorisation to file the appeal within sufficient time so that he may fulfil the requirements of filing the appeal in the Tribunal. In this case, we do not see it there on the part of the ITO. Accordingly, we hold that in this case, the delay of seven days is not proved and as such, the preliminary objection of the learned counsel for the assessee is to be allowed. Hence, we hold that the appeal of the revenue is liable to be dismissed on the preliminary issue that the appeal of the revenue is time barred by seven days.
7. We are further of the opinion that the appeal of the revenue is also liable to be dismissed on merits. The reasons are that no doubt the basis for imposition of penalty is the additions finally sustained by the Tribunal. But we have to see that whether the additions so sustained are representing the concealed income of the assessee for default under section 271(1) (c). It is also to be seen that whether the explanation offered by one assessee is satisfactory in response to notice under section 217(1) (c).
7.1 As it is evident that the additions made by the ITO in quantum assessment of Rs. 71,025 which at the level of the Tribunal was of the amount of Rs. 27,120 plus Rs. 5,400 amounting to Rs. 32,520 which shows that the basis of imposition of penalty is basically changed. Moreover, the addition finally sustained is the result of change of opinion of the authority, the first appellate authority and second appellate authority. Thus, when this is so, the amount of the addition sustained referred to above cannot be taken that the same is representing the concealed income of the assessee who concealed it with contumacious conduct. Further, the assessees explanation to the ITO that the yarn pledged to the Bank of Baroda to have overdraft on 5-6-1974 and 9-12-197 was silk yarn as it was taken from J. Trading Co., Amritsar and the copy of the books of account of J. Trading Co. was produced.
The entries in this copy are produced in paragraph 3 of the order of the Commissioner (Appeals) and these are as under : To 300 kgs. of art silk yarn-count 150-III - JK Transferred to you at the rate of Rs. 28.66 per kg.
By 300 kgs. of art silk yarn-count 150-III - JK recd. back from you (Transferred on 12-8-1974) To 150 kgs. of stapple yarn III-T Transferred to you at the rate of 79.75 per 5 kg.
By 150 kgs. of stapple yarn IT recd. back from you (Transferred to you on 12-8-1984) To 250 kgs. of art silk yarn-count 300-III `Kesoram Transferred ` to you at the rate of Rs. 23.15 per kg.
By 100 kgs. of art silk yarn-count 3000-III Kesoram recd. back from you (Transferred to you on 9-12-1974) To 100 kgs. of art silk yarn-count 300-III `Kesoram Transferred to you at the rate of Rs. 23.15 per kg.
By 250 kgs. of art silk yarn-count 300-III `Kesoram recd. back from you (Transferred to you on 6-12-1974) Therefore, from the aforesaid entries it is proved that actually the yarn pledged was silk yarn and not woollen yarn though it was stated as woollen yarn in the documents furnished by the assessee to the bank to have the overdraft. The assessee also furnished the certificate of the bank manager dated 30-10-1981 and the same is at p. 17 of the paper book, which says as under : "We refer to your letter dated 14th October, 1981 and advise that keeping in view the turnover of the stocks satisfactory conduct of the account and genuineness of the party, the cases/bales tendered for pledged are not generally opened for verifications.
However, we state that the referred entries pertain to very old period and as such there is no such information available at our end." Despite it, the ITO asked the Bank of Baroda to inform whether the assessee pledged to it woollen yarn to have the overdraft facilities.
The bank manager stated in reply to it that the bank has not verified it. From these two documents of the bank it is manifest that the explanation offered by the assessee is proved when he says that the assessee actually pledged silk yarn and not woollen yarn. Therefore, in view of the documentary evidences, furnished by the assessee, namely, the copy of the books of J. Trading Co. and the certificates of the bank, mentioned above, we hold that the assessee has discharged its initial onus to prove that the amounts of additions (supra) are not there due to fraud or wilful or gross neglect on his part. Therefore, it is for the revenue thereafter to prove that the amount of aforesaid additions is there as concealed income of the assessee, which is on account of contumacious conduct on the part of the assessee. There is no material collected by the revenue to discharge this onus, i, e., to prove that the amount of Rs. 27,120 is representing the concealed income of the assessee and that too is concealed with contumacious conduct.
7.2 Besides, the AAC has assigned cogent and relevant reasons for accepting the contentions of the learned counsel for the assessee in paragraph 8 of his order, with which we agree and there is no material brought on record by the revenue to rebut the finding of the Commissioner (Appeals) when he says that as stated earlier, no doubt, the addition has been made in the total income on account of variation in the information given in the bank statement and the stock position with the appellant-firm yet on the basis of the explanation as given it would appear to be doubtful as to whether what was actually pledged in the bank was woollen yarn or art silk yarn because per the certificate of the bank they also could not categorically say as to its actual contents except that they have simply believed the appellant-firm at the relevant time, that no doubt, the appellant-firm has said to have tried to deceive the bank by giving wrong information of course with a view to get extra overdraft facilities yet it was for the bank to verify physically the stock, which they do not appear to have done, that being the position. Moreover, the bank never took it so, rather always believed the assessee. Thus the appellant-firm could not be charged for concealment of income or furnishing inaccurate particulars thereof even under the provisions of Explanation to section 271(1) (c).
7.3 Regarding the addition of Rs. 5,400 the entries produced above prove that the basis for imposition of penalty under section 217(1) (c) regarding it, is shattered, as the cost of 11 kgs. has been fully explained by these entries. Further, the AAC accepting the explanation representing has assigned cogent and relevant reasons, which are there in paragraph 4 of his order and, there is no material to rebut these and as such, we agree also with him. The paragraph 4 of his order is reproduced for ready reference as under : "According to the authorised representative of the appellant-firm, no doubt, the bank statements indicated that what was pledged was woollen yarn but they have already furnished a certificate dated 30-10-1981 to the effect that since the appellant-firm enjoyed good credit with them it was needless to inspect the pledged goods and in fact a further certificate dated 2-3-1982 was also obtained by the ITO wherein they have categorically stated that the bank did not make any physical inspection of the goods at the relevant time in view of the satisfactory conduct of the party and as per the general practice.
Hence, according to the authorised representative of the appellate-firm this itself indicates that what the appellant-firm was alleging could have been the correct state of affairs." 7.4 No doubt, the learned departmental representative has cited Shri Narain Khannas case (supra) but the same is not applicable to the facts of this case in view of the fact that in this case, the assessee has proved that actually it was silk yarn, which was pledged. Moreover, the bank authorities have stated that they believed the assessee and, therefore, did not verify the goods, which however justify the stand of the assessee and falsify that of the revenue. Moreover, in penalty proceedings preponderance of probabilities and possibilities to be seen which we have seen and are in favour of the assessee, as we have mentioned above.
7.5 Their Lordships of the Patna High Court in the case of Sardar Bhagat Singh (supra), held that a high standard is always applied for the proof of a positive fact, where the standard of preponderance of probability is sufficient to prove a negative fact, that what the Explanation requires or demand of the assessee is the discharge of the onus of proof of a negative fact, namely, that there has been no active concealment or fraud or wilful neglect on the part of the assessee, that where the onus is on one to prove a negative fact, direct evidence, generally and ordinarily, may be hardly possible, that it is, however, to well settled that circumstances of mere suspicion will not warrant the conclusion of fraud that : ".... if the broad probabilities of the explanation offered are such as may be believed, though not sufficient for conclusive proof, the onus to prove such a negative fact can well be said to have been discharged by the assessee. He may discharge this onus by placing the facts found in the assessment order to show that the facts found therein had not in the least given an inkling as to fraud or gross or wilful neglect on the part of the assessee and, therefore, it must be held without proof of any other fact that there was no fraud committed by the assessee in his failure to return the correct income nor was he acting grossly or wilfully negligently....." In this case, the harping of the department that the assessee has pledged the goods to the Bank of Baroda mentioning therein that the goods pledged are woollen yarn but the assessee has proved that it was actually silk art yarn in view of the facts stated above. The assessee is within his rights to do so in the penal proceedings in view of the fact that the penal proceedings are specific and independent. In the quantum of appeal before the Tribunal, the assessee was not in a position to produce the aforesaid certificates of the bank as well as the copy of the books of account of the sister concern J. Trading Co.
Furthermore, in the quantum assessment and quantum appeal the onus was on the assessee to prove while in the penal proceedings, there is initial onus only on the assessee to prove that there is no fraud or wilful neglect on the part of the assessee which he has discharged on furnishing the aforesaid documentary evidence and the revenue has not at all brought any material to discharge the onus that the aforesaid additions are there on account of contumacious conduct and, are representing the concealed income of the assessee.
8. In view of our above discussion and reasons thereto, we hold that the assessee cannot be penalised for the amounts of additions made and sustained in the assessment proceedings, up to the level of the Tribunal as the explanation of the assessee is satisfactory, when he has shown that these amounts are not representing the concealed income of the assessee. Moreover, there is no concealment of income or furnishing of inaccurate particulars on his part, which is there on account of wilful neglect or fraud in view of the totality of the facts and circumstances of the case. Besides, the preponderance of probabilities is there in favour of the assessee, as we have mentioned above and as such, no penalty is imposable on the assessee and, therefore, we hold that the revenue is to fail on merits also.
8.1 In consequence of it, we hold that the appeal of the revenue is to fail as it is time barred. Moreover, there is no fraud and wilful neglect on the part of the assessee, to conceal income or to furnish its inaccurate particulars, which has resulted in the additions of Rs. 25,120 and Rs. 5,400 (supra) made and sustained by the authorities below and the Tribunal in the quantum of appeal. Hence, no penalty is imposable on the assessee on the totality of the facts and circumstances of the case under section 271(1) (c) read with its Explanation.
8.2 The Commissioner (Appeals) has deleted the penalty imposed by the ITO. Hence, we confirm this order.