Sri M Sudhakar, Guntur V. The ACIT, Circle-2(1), Guntur

ITA 138/VIZ/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2652 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 02-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR; T L PETER
• Keywords: Gift; Income from undisclosed sources; Search and seizure; Salary income; Period of limitation; Reasonable cause; Agreed addition; Onus to prove; Revised return; Reason to believe
• Section: 143(3); 11A; 153A; 131

Judgement Text

ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO S . 131 TO 136 /VIZAG/ 20 10 ASSESSMENT YEAR S : 2002 - 03 TO 2007 - 08 RESPECTIVELY SMT. M. SHAKUNT H ALAMMA GUNTUR ACIT CIRCLE - 2(1) VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO. ACVPM 9450F ITA NOS.13 7 TO 1 40 /VIZAG/2010 ASSESSMENT YEARS : 200 3 - 0 4; 2005 - 06; 2006 - 07 & 2007 - 08 RESPEC TIVELY SRI M. SUDHAKAR GUNTUR ACIT CIRCLE - 2(1) VISAKHAPATNAM (APPELLANT) V S. (RESPONDENT) PAN NO. ACVPM 9449E ITA NOS.141 TO 143/VIZAG/2010 ASSESSMENT YEARS : 200 2 - 0 3 ; 200 3 - 0 4 & 200 5 - 0 6 RESPECTIVELY M/S. JANACHAITANYA HOUSING LTD GUNTUR ACIT CIRCLE - 2(1) VISAKHAPATNAM (APPE LLANT) VS. (RESPONDENT) PAN NO. AAACJ 5621K APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI T.L. PETER, DR & SHRI J. SIRI KUMAR, DR ORDER PER BENCH : - THESE APPEALS ARE PREFERRED BY DIFFERENT ASSESSEES AGAINST THE RESPECTIVE ORDERS OF THE CIT (A) CONFIRMING THE PENALTY LEVIED U/S 271(1)(C) OF THE I.T. ACT. SINCE COMMON GROUNDS ARE INVOLVED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 2. DURING THE COURSE OF HEARING OF THE APPEAL, THE AS SESSES HAVE FILED THE REVISED GROUNDS OF APPEAL IN ALL THESE APPEALS AND THE SAME WERE TAKEN ON ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 2 RECORD IN PLACE OF ORIGINAL GROUNDS AND THROUGH REVISED GROUNDS, THE PENALTY CONFIRMED BY THE CIT(A) ARE CHALLENGED IN ALL THESE APPEALS. 3. THE BRIEF FACTS O F THESE CASES ARE THAT SMT. MADALA SHAKUNTHALAMMA AND SHRI MADALA SUDHAKAR ARE THE DIRECTOR AND MANAGING DIRECTOR RESPECTIVELY OF M/S. JANCHAITANYA HOUSING LIMITED. BOTH THE DIRECTOR AND MANAGING DIRECTOR DERIVED INCOME FROM SALARY, INCOME FROM HOUSE PROP ERTY AND INCOME FROM OTHER SOURCES AND HAVE BEEN FILING RETURNS OF INCOME REGULARLY. A SURVEY OPERATION WAS CONDUCTED IN THE BUSINESS PREMISES OF M/S. JANCHAITANYA HOUSING LIMITED ON 24.1.2007 AT VARIOUS PLACES ACROSS THE STATE WHICH WAS ULTIMATELY CONVER TED INTO A SEARCH AS LAID DOWN BY SECTION 132(1) OF THE I.T. ACT ON THE SAME DATE. DURING THE COURSE OF SEARCH, STATEMENT OF SMT. M. SHAKUNTHALAMMA WAS RECORDED U/S 132(4) OF THE I.T. ACT. DURING THE COURSE OF SEARCH, VARIOUS INCRIMINATING MATERIAL RELAT ING TO UNDISCLOSED INCOME WERE FOUND AND SEIZED AND WHEN THE MATERIAL WAS CONFRONTED TO THE ASSESSEES, HE OFFERED A SUBSTANTIAL AMOUNT OF UNDISCLOSED INCOME IN THE HANDS OF THE INDIVIDUAL AS WELL AS IN THE HANDS OF THE COMPANY. IN THE HANDS OF THE COMPANY , SHE HAS DECLARED A SUM OF RS.22,44,56,000/ - AS UNACCOUNTED INCOME FOR THE FINANCIAL YEAR 2006 - 07 CORRESPONDING TO ASSESSMENT YEAR 2007 - 08 AND RS.3.70 CRORES FOR FINANCIAL YEAR 2004 - 05 RELEVANT TO THE ASSESSMENT YEAR 2005 - 06. SHE HAS ALSO OFFERED A SUM O F RS.50 LAKHS IN THE HANDS OF HER SON M. SUDHAKAR, MANAGING DIRECTOR OF M/S. JANCHAITANYA HOUSING LIMITED AND ACCORDINGLY THE UNDISCLOSED INCOME WAS OFFERED TO THE EXTENT OF RS.2664.56 LAKHS ON WHICH THE TAXES WERE ALSO PAID. IN RESPONSE TO NOTICE U/S 153 C, THE ASSESSEES HAVE FILED THE RETURN OF INCOME AND IN THEIR COMPUTATION OF INCOME THEY PUT A NOTE GIVING AN UNDERTAKING TO OFFER ADDITIONAL INCOME IN ADDITION TO WHAT THEY HAVE DISCLOSED IN THE RETURN OF INCOME IF ANY OMISSIONS ARE NOTICED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS SUBJECT TO NON - LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEES HAVE ALSO FILED A LETTER REITERATING THEIR STAND THAT THEY WOULD OFFER SUCH DIFFERENCE AMOUNT IF ANY, NOTICED DURING THE ASSESSMENT PROCEEDINGS AS ADDITIONAL INCOME IN ADDITION TO THE AMOUNT THEY HAVE DISCLOSED IN THE RETURN OF INCOME FILED IN RESPONSE TO ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 3 NOTICE U/S 153C OF THE I.T. ACT. IN ALL THE ASSESSMENT SOME MORE DISCREPANCIES WERE NOTICED AND THE ASSESSIN G OFFICER HAS PROPOSED TO MAKE SOME MORE ADDITIONS TO WHICH THE ASSESSEES HAVE AGREED TO AND OFFERED THAT AMOUNT ALSO. ACCORDINGLY, THE ADDITIONS WERE MADE IN THE HANDS OF THE ASSESSEES IN RESPECTIVE YEARS. THESE ADDITIONS WERE NOT CHALLENGED BY THE ASSE SSEES. 4. THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT. DURING THE PENALTY PROCEEDINGS, THE ASSESSEES HAVE CONTENDED THAT THEY HAVE MADE A VOLUNTARY OFFER DURING THE COURSE OF SEARCH AND ALSO DURING THE COUR SE OF ASSESSMENT PROCEEDINGS WITH THE UNDERSTANDING THAT NO PENALTY U/S 271(1)(C) WOULD BE LEVIED. THEREFORE, THE ADDITIONS WERE MADE ON AGREED BASIS AND ASSESSEE IS ENTITLED FOR THE IMMUNITY FROM PENALTIES U/S 271(1)(C) OF THE ACT. THE CONTENTIONS OF TH E ASSESSEES WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND ACCORDINGLY, PENALTY U/S 271(1)(C) LEVIED IN THE HANDS OF THE ASSESSEES IN ALL ASSESSMENT YEARS. THE ASSESSEE S HA VE PREFERRED THEIR APPEAL S BEFORE THE CIT(A) BUT DID NOT FIND FAVOUR WITH HIM. BEF ORE THE CIT(A), THE ASSESSEE S HA VE ALSO CLAIMED THE PROTECTION OF PROVISIONS OF SECTIONS 132(4) OF THE I.T. ACT. BUT CIT(A) HAS REJECTED THE CONTENTION OF THE ASSESSEES AFTER HAVING HELD THAT PROTECTION UNDER THIS PROVISION CAN BE GIVEN WITH REGARD TO THE DECLARATION OF UNDISCLOSED INCOME DURING THE COURSE OF STATEMENT RECORDED U/S 132(4) OF THE ACT. IT IS NOT AVAILABLE TO THE DECLARATION/DISCLOSURE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5 . AGGRIEVED, THE ASSESSEES HAVE PREFERRED THEIR APPEALS BE FORE THE TRIBUNAL WITH THE SUBMISSIONS THAT THE ADDITIONS WERE MADE ON AGREED BASIS WITH AN UNDERSTANDING THAT NO PENALTY U/S 271(1)(C) WOULD BE LEVIED. IT IS NOT A CASE WHERE THE ASSESSEE WAS CORNERED OR PUSHED TO THE WALL AND THERE AFTER HE CAME FORWARD FOR DISCLOSURE. IN THIS CASE, THE ASSESSEES WERE QUITE SINCERE SINCE BEGINNING AS THEY HAVE MADE A VOLUNTARY DISCLOSURE DURING THE COURSE OF SEARCH ITSELF U/S 132(4) OF THE ACT. THE ASSESSEES DID NOT STOP THERE. THEY PUT A SPECIFIC NOTE IN THEIR COMPUT ATION OF INCOME FILED ALONG ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 4 WITH THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S 153C OF THE ACT STATING THEREIN THAT THEY UNDERTOOK TO OFFER ADDITIONAL INCOME IN ADDITION TO WHAT THEY HAVE DISCLOSED IN THE RETURN OF INCOME IF ANY OMISSIONS ARE NOTICED DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS SUBJECT TO NON - LEVY OF PENALTY U/S 271(1)(C). NOT ONLY THAT , THE ASSESSEES HAVE FILED THE LETTERS DURING THE ASSESSMENT PROCEEDINGS OF ALL RESPECTIVE YEARS AGAIN GIVING UNDERTAKING THAT THEY ARE READY TO OFFER THE A DDITIONAL INCOME ON THE DIFFERENCE AMOUNTS OR FOR OTHER OMISSIONS IF ANY NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SINCE THE ACCOUNTS WERE SO COMPLICATED, ASSESSEES COULD NOT CALCULATE THE EXACT FIGURE OF THE UNDISCLOSED INCOME AND THAT IS WHY THEY HA VE MADE A BLANK ET OFFER TO THE ASSESSING OFFICER TO WORK OUT THE UNDISCLOSED INCOME FOR WHICH ASSESSEE HAS AGREED TO MAKE A DECLARATION FOR THE SAME AS AN ADDITIONAL INCOME AND READY TO PAY THE TAX THEREON. THEREFORE, WHATEVER ADDITIONS WERE MADE T HEY ARE SOLELY BASED ON THE BASIS OF THE AGREEMENTS OR THE DECLARATION OF THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT THERE WAS A CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEES. 6 . THE LD. COUNSEL FOR THE A SSESSEE FURTHER PLACED A HEAVY RELIANCE UPON THE FOLLOWING JUDGEMENTS: 1. CIT VS. SURESH CHAND BANSAL 223 CTR (CAL) 128 2. ACIT VS. MA LU ELECTRODES (P) LTD 127 TTJ (NAG) 599 3. ADDL. CIT VS. PREM CHAND GARG 123 TTJ (DEL) (TM) 433 4. RAJESH C. GANDHI VS. ITO ITA NO.31 58/M/09 DT.9.3.2010. 7 . THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT CIT(A) HAS PLACED A HEAVY RELIANCE WHILE CONFIRMING THE PENALTY ON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (306 ITR 277) IN WHI CH THE APEX COURT HAS HELD THAT THE PRESENCE OF MENS REA IS NOT REQUIRED TO BE ESTABLISHED. IT IS A CIVIL LIABILITY. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE JUDGEMENT WAS RENDERED BY THE APEX COURT DEALING WITH THE PROVISIONS UNDER THE E XCISE ACT AND THEY HAVE SIMPLY MADE A ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 5 REFERENCE TO THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. THIS JUDGEMENT WAS EXAMINED/CONSIDERED BY THE APEX COURT SUBSEQUENTLY IN THE CASE OF UOI VS. RAJASTHAN SPINNING & WEAVING MILLS 224 CTR (SC) 1 & CIT VS. RE LIANCE PRODUCTS (P) LTD 322 ITR 158 (SC) IN WHICH THE IMPACT OF THIS JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILES (SUPRA) HAS BEEN TONED DOWN. THE JUDGEMENT WAS ALSO CONSIDERED BY VARIOUS HIGH COURTS AND IT WAS REPEATEDLY HELD THAT IN CA SE OF A VOLUNTARY SURRENDER, THE PENALTY U/S 271(1)(C) SHOULD NOT BE LEVIED. 8 . THE LD. D.R. ON THE OTHER HAND HAS PLACED A HEAVY RELIANCE UPON THE ORDERS OF THE CIT(A) IN RESPECTIVE YEARS WITH THE SUBMISSIONS THAT IN THE CASE OF DHARMENDRA TEXTILE PROC ESSORS AND OTHERS (SUPRA), THE APEX COURT HAVE CATEGORICALLY HELD THAT THE PRESENCE OF MENS REA IS NOT REQUIRED TO BE ESTABLISHED WHILE IMPOSING THE PENALTY U/S 271(1)(C) OF THE ACT. IT IS MERELY A CIVIL LIABILITY AND IT HAS TO BE IMPOSED WHENEVER THE AS SESSEE FOUND GUILTY OF CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS. THE BENEFIT OF IMMUNITY U/S 132(4) READ WITH EXPLANATION 5 OF SECTION 271(1)(C) HAS ALREADY BEEN AVAILED BY THE ASSESSEES WITH RESPECT TO THE DISCLOSURE/DECLARATION MADE DURING T HE COURSE OF SEARCH PROCEEDINGS U/S 132(4) OF THE ACT. THE SUBSEQUENT DISCLOSURE DURING THE ASSESSMENT PROCE EDINGS CANNOT BE CALLED TO BE DISCLOSURE MADE U/S 132(4) OF THE ACT IN AS MUCH AS THE ASSESSMENT PROCEEDINGS STARTS AFTER THE CONCLUSION OF THE SEA RCH PROCEEDINGS. THEREFORE, THE ASSESSEE CANNOT SEEK THE IMMUNITY WITH RESPECT TO THE DISCLOSURE STATEMENT OR THE AGREED ADDITION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THE REVENUE HAS RIGHTLY LEVIED THE PENALTY ON AN ADDITION AGREE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 9 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGEMENTS REFERRED TO BY THE PARTIES AND DOCUMENTS PLACED ON RECORD. FROM A CAREFUL PERUSAL OF THE STATEMENT OF MR. M. SHAKUNTHALAMMA, DIRECTOR OF THE COMPANY M/S. JANCHAITANYA HOUSING PVT. LTD. W HICH IS AVAILABLE AT PG.NOS.1 - 22 ALONG WITH ITS ENGLISH VERSION, WE FIND THAT DURING THE COURSE OF EXAMINATION BY THE SEARCH PARTY ON 24.1.2007 AND ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 6 24.3.2007, THE ASSESSEE M. SHAKUNTHALAMMA CAME FORWARD AND MADE A VOLUNTARY DISCLOSURE OF A SUBSTANTIAL AMOUNT IN THE HANDS OF THE COMPANY AND THE INDIVIDUALS. THE TOTAL UNDISCLOSED INCOME DECLARED U/S 132(4) OF THE ACT WAS OF RS.2664.56 LAKHS AND ON THIS AMOUNT, T HE TAX WAS ALREADY PAID. SINCE THE DISCLOSURE WAS MADE DURING THE COURSE OF SEARCH PROCEEDINGS U/S 132(4) OF THE ACT, THE ASSESSEE WAS GRANTED IMMUNITY FROM LEVYING THE PENALTY U/S 271(1)(C) OF THE ACT. THEREFORE, THERE IS NO DISPUTE IN THIS REGARD IN RE SPECT OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. IN RESPONSE TO NOTICE U/S 153C OF THE ACT, THE ASSESSEES HAVE FILED THEIR RESPECTIVE RETURNS OF INCOME ALONG WITH THE COMPUTATION OF INCOME. IN THEIR COMPUTATION OF INCOME, THE ASSESSEES GAVE A SPE CIFIC UNDERTAKING TO OFFER THE ADDITIONAL INCOME IN ADDITION TO WHAT THEY HAVE DISCLOSED IN THE RETURN OF INCOME IF ANY OMISSIONS ARE NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS SUBJECT TO NON - LEVY OF PENALTY. FOR THE SAKE OF REFERENCE, THE EXTRAC T OF THE NOTE GIVEN IN THE COMPUTATION OF INCOME IS AS UNDER : DURING THE COURSE OF SEARCH PROCEEDINGS WE HAVE UNDERTAKEN TO VERIFY THE SEIZED AND IMPOUNDED MATERIAL WHICH IS VOLUMINOUS AND OFFER ADDITIONAL INCOME SO AS TO COVER ANY INHERENT DEFICIENCIES. HOWEVER DUE TO PAUCITY OF TIME, EXTENSIVE VERIFICATION COULD NOT BE COMPLETED. WE THEREFORE UNDERTAKE TO OFFER ADDITIONAL INCOME IN ADDITION TO WHAT WE HAVE NOW DISCLOSED IN THE RETURN OF INCOME, IF ANY OMISSIONS ARE NOTICED DURING THE COURSE OF ASST. P ROCEEDINGS, SUBJECT TO NON - LEVY OF PENALTY U/S 271(1)(C) OF THE I.T. ACT. 10 . THE ASSESSEES DID NOT STOP HERE BY PUTTING A NOTE IN THE COMPUTATION OF INCOME . T HEY FILED A LETTER DURING THE COURSE OF ASSESSMENT PROCEEDINGS STATING THEREIN THAT THEY C A ME FORWARD TO OFFER SUCH DIFFERENCE AMOUNT AND ALSO OTHER OMISSIONS IF ANY, NOTICED DURING THE ASSESSMENT PROCEEDINGS AS AN ADDITIONAL INCOME IN ADDITION TO WHAT THEY HAVE DISCLOSED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153C OF THE ACT. A C OPY OF THE LETTER DATED 23.10.2008 IS AVAILABLE AT PG.6 OF THE COMPILATION OF THE ASSESSEES. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PORTION AS UNDER: ACCORDINGLY, WE HAVE SINCE VERIFIED THE SEIZED AND IMPOUNDED MATERIAL AND NOTICED THAT THER E ARE SOME DIFFERENCES IN THE PURCHASE VALUE OF THE LANDS RECORDED IN THE REGULAR BOOKS OF ACCOUNTS AND THE AMOUNTS NOTED IN THE MATERIAL IMPOUNDED. EVEN THOUGH THERE ARE NO WRITTEN AGREEMENTS OR EVIDENCE FOR PAYMENTS ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 7 TO THE LAND LORDS AS PER NOTINGS FOUN D IN THE IMPOUNDED MATERIAL, WE ARE COMING FORWARD TO OFFER SUCH DIFFERENCE AMOUNTS AND ALSO OTHER OMISSIONS, IF ANY, NOTICED DURING THE ASST. PROCEEDINGS AS ADDITIONAL INCOME IN ADDITION TO WHAT WE HAVE DISCLOSED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153C OF THE I.T. ACT, 1961. 11 . FROM A CAREFUL PERUSAL OF THE NOTE AND THE LETTER, IT HAS BECOME ABUNDANTLY CLEAR THAT SINCE BEGINNING THE ASSESSEES DID NOT WANT ANY CONFRONTATION WITH THE DEPARTMENT. EVEN THEY DID NOT WANT TO FURNISH ANY EXPLANATIONS, THE EXCUSES FOR THE UNDISCLOSED INCOME TO BE DETERMINED ON THE BASIS OF THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. THE INTENTION OF THE ASSESSEES APPEAR TO BE VERY CLEAR THAT THEY WERE INTERESTED SINCE BEGINNING TO SETTLE DISPUTE WITH THE DEPARTMENT BY MAKING A VOLUNTARY DISCLOSURE. THEREFORE, IT IS NOT PROPER TO HOLD ATLEAST IN THIS CASE THAT ASSESSEE HAS MADE A DISCLOSURE/OFFERED OR AGREED TO AN ADDITION WHEN T HE Y WERE PUSHED TO THE WALL OR CORNER ED . THEREFORE, WHATEVER DECLARATION S ARE MADE BY THE ASSESSEE S , IT IS VOLUNTARY. MOREOVER, THE ASSESSING OFFICER DID NOT BRING OUT ANY OF THE MATERIAL TO CONCLUDE THAT THE ASSESSEES HAVE EITHER CONCEALED THE INCOME OR HAVE FURNISHED THE INACCURATE PARTICULARS. THEY HAVE MADE T HE ADDITIONS ON THE BASIS OF THE STATEMENT OF THE ASSESSEES OR THE AGREEMENT ARRIVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITH THE ASSESSEES. SINCE THE ASSESSEE HAS PUT A SPECIFIC NOTE THAT HE IS WILLING TO OFFER THE ADDITIONAL INCOME IN ADDITION T O WHAT HAS BEEN OFFERED DURING THE COURSE OF SEARCH, BUT IT SHOULD BE SUBJECT TO NON - LEVY OF PENALTY U/S 271(1)(C) OF THE ACT , T HEY WERE UNDER A BONAFIDE IMPRESSION THAT IN CASE HE OFFERED THE ADDITIONAL INCOME, THE PENALTY WOULD NOT BE LEVIED. NOW THE QU ESTION COMES WHETHER UNDER THESE CIRCUMSTANCES, THE PENALT IES LEVIED U/S 271(1)(C) UPON THE ASSESSEES ON A VOLUNTARY DISCLOSURE ARE SUSTAINABLE UNDER THE EYE S OF LAW? 1 2 . BEFORE THE JUDGEMENTS OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTLE PROCESSORS AND OTHERS (SUPRA) IT WAS REPEATEDLY HELD BY THE APEX COURT AND VARIOUS HIGH COURTS THROUGH THEIR JUDICIAL PRONOUNCEMENTS THAT IN PENALTY BEING QUASI - CRIMINAL PROCEEDINGS, THE MENS REA SHOULD BE PRESENT. MERE INTENTION CANNOT BE PUNISHABLE EXCEPT WHERE T HERE IS SOME TAX ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 8 CONSEQUENCES ARIS ING OUT OF CONCEPT OF DEEMED CONCEALMENT IN EXPLANATION TO SECTION 271(1)(C) OR UNDER THE BLOCK SCHEME OF ASSESSMENT U/S 158BD, WHERE THE ENTRIES IN THE ACCOUNT BOOKS BY THEMSELVES MAY LEAD TO AN INFERENCE OF CONCEALMENT. APART FROM THE FACT THAT THERE SHOULD BE CONCEALMENT, THERE SHOULD ALSO BE JURISDICTION FOR THE ASSESSING OFFICER BECAUSE IT IS HE WHO SHOULD BE SATISFIED THAT CONCEALMENT HAD TAKEN PLACE. IT IS HE WHO SHOULD HAVE MATERIAL FOR THE CONCLUSION THAT THERE H AS BEEN CONCEALMENT. IT IS A SATISFACTION THAT A PERSON HAS CONCEALED INCOME AND NOT UNDER MERE ISSUE OF NOTICE OR INTIMATION WHICH WOULD JUSTIFY THE JURISDICTION. THESE FACTS HAVE BEEN CLARIFIED BY THE APEX COURT IN THE CASE OF D.M. MANAS V I VS. CIT 86 I TR 557 (SC). WHILE THE OTHER PENALTIES REFERRED TO ACT OF OMISSION OR COMMISSION EXCUSED ON REASONABLE CAUSE BEING SHOWN, CONCEALMENT IS A STATE OF MIND AND THE PENALTY THEREFORE IS EXCUSED IF THE ACT COMPLAIN ED OF DOES NOT TANTAMOUNT TO MENS REA OR GUIL TY OF MIND. IN THE CASE OF SIR SHADILAL AND GENERAL MILLS VS. CIT 168 ITR 705, IT WAS HELD BY THE APEX COURT THAT THERE MAY BE 101 REASONS FOR WHICH ASSESSEE M AY HAVE MADE ADMISSIONS BUT THIS WOULD NOT ABSOLVE THE REVENUE FROM PROVING THE QUASI - CRIMINAL O FFENCE. 1 3 . IN THE CASE OF DILIP N. SHROFF VS. JCIT 291 ITR 519, THERE LORDSHIP OF THE APEX COURT HAVE HELD THAT CLAUSE ( C ) OF SUB - SECTION 1 OF SECTION 271 CATEGORICALLY STATES THAT PENALTY SHOULD BE LEVIABLE IF THE ASSESSEE CONCEALS THE PARTICULARS OF HI S INCOME OR FURNISHES INACCURATE PARTICULARS THERE OF. BY REASON OF SUCH CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS ALONE, THE ASSESSEE DOES NOT IPSO - FACTO BECOME LIABLE FOR PENALTY. IMPOSITION OF PENALTY IS NOT AUTOMATIC. LEVY OF PENALTY NOT O NLY THE DISCRETIONARY IN NATURE BUT SUCH DISCRETION IS REQUIRED TO BE EXERCISED ON THE PART OF THE A.O., KEEPING THE RELEVANT FACTORS IN MIND, SOME OF THOSE FACTORS APART FROM BEING INHERENT IN THE NATURE OF PENALTY PROCEEDINGS. THE PENALTY PROCEEDINGS AR E NOT TO BE INITIATED AS HAS BEEN NOTICED BY THE WAN CHOO COMMITTEE ONLY TO HARASS THE ASSESSEE. THE APPROACH OF THE A.O. IN THIS BEHALF MUST BE FAIR AND OBJECTIVE. CLAUSE (III) OF SUB - SECTION 1 OF SECTION 271 AGAIN PROVIDES FOR A DISCRETIONARY JURISDICTI ON UPON THE ASSESSING AUTHORITY IN AS MUCH AS THE AMOUNT OF PENALTY ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 9 MAY NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE E VADED BY THE REASON OF SUCH CONCEALMENT OF PARTICULARS OF HIS INCOME, BUT IT MAY NOT EXCEED THREE TIMES THERE OF. THE FACTS WHICH ARE MATERIAL FOR THE PURPOSE OF COMPUTATION OF TOTAL INCOME AS IS SOUGHT TO BE EMPHASIZED IN EXPLANATION 1, REFERRED TO COMPUTATION OF INCOME ON THE PART OF THE ASSESSEE WHICH IS DIRECTLY RELATABLE TO CLAUSE ( A ) FAILURE TO OFFER AN EXPLANATION AND/OR OFFERING AN EXPLANATION WHICH IS FALSE ; AND ( B ) WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE. ONLY IN THE EVENT THE FACTORS ENUMERATED IN CLAUSE (A) & (B) OF EXPLANATION 1 ARE SATISFIED AND A FINDING IN THIS BEHALF IS A RRIVED AT BY THE A.O., THE LEGAL FICTION CREATED THERE UNDER WOULD BE ATTRACTED. THE EXPRESSION CONCEALED IS OF GREAT IMPORTANCE, IT SIGNIFIES A DELIBERATE ACT OR OMISSION ON THE PART OF THE ASSESSEE. SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THE TERM INACCURATE PARTICULARS IS NOT DEFIN ED . FURNISHING OF AN ASSESSMENT OF VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING OF INACCURATE PARTICULARS. EVEN IF THE EXPLANATIONS ARE TAKEN RECOURSE TO, A FINDING HAS TO BE ARRIVED AT HAVING REGARD TO CLAUSE ( A ) OF EXPLANATION 1 THAT THE A.O. IS REQUIRED TO ARRIVE AT A FINDING THAT EXPLANATION OFFERED BY THE ASSESSEE, IN THE EVENT HE OFFERS ONE, WAS FALSE. HE MUST BE FOUND TO HAVE F AILED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY NOT BONAFIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE INCOME WERE NOT DISCLOSED BY HIM. THUS, APART FROM HIS EXPLANATION BEING NOT BONAFIDE, IT SHOULD HAVE BEEN FOUND AS OF FACT THAT HE HA S NOT DISCLOSED ALL THE FACTS WHICH WAS MATERIAL TO THE COMPUTATION OF HIS INCOME. THE EXPLANATION MUST BE PRO CEEDED BY A FINDING AS TO HOW AND IN WHAT MANNER HE FURNISH ED THE PARTICULARS OF HIS INCOME IT IS BEYOND ANY DOUBT OR DISPUTE THAT FOR THE SAID P URPOSE , THE I.T.O. MUST ARRIVED AT A SATISFACTION IN THIS BEHALF. 1 4 . THE PRIMARY BURDEN OF PROOF, THEREFORE IS ON THE REVENUE. THE STATUTE REQUIRES SATISFACTION ON THE PART OF THE A.O. HE IS REQUIRED TO ARRIVE AT A SATISFACTION SO AS TO SHOW THAT THERE IS A PRIMARY EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAD CONCEALED THE AMOUNT OR FURNISHE D INACCURATE PARTICULARS AND THIS ONUS IS TO BE DISCHARGED BY THE DEPARTMENT. WHILE CONSIDERING AS TO ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 10 WHETHER THE ASSESSEE HA S BEEN ABLE TO DISCHARGE HIS BURDEN, THE A.O. SHOULD NOT BEGIN WITH THE PRESUMPTION THAT HE IS GUILTY. ONCE THE PRIMARY BURDEN OF PROOF IS DISCHARGED, THE SECONDARY BURDEN OF PROOF WOULD SHIFT ON THE ASSESSEE BECAUSE THE PROCEEDINGS U/S 271(1)(C) IS OF PENAL NATURE IN THE SENSE THAT ITS CONSEQU ENCES ARE INTENDED TO BE AN EFFECTIVE DETERRENT WHICH WILL PUT A STOP TO PRACTICE S, WHICH THE PARLIAMENT CONSIDERS TO BE AGAINST THE PUBLIC INTEREST AND, THEREFORE, IT WAS FOR THE DEPARTMENT TO ESTABLISH THAT THE ASSESSEE SHALL BE GUILTY OF THE PARTICULARS OF THE INCOME. THE ORDER IMPOSING PENALTY IS QUASI - CRIMI NAL IN NATURE AND , THUS , BURDEN LIES ON THE DEPARTMENT TO ESTABLISH THAT THE ASSESSEE HAD CONCEALED HIS INCOME. SINCE BURDEN OF PROOF IN PENALTY PROCEEDINGS VARIES FROM THAT IN THE ASSESSMENT PROCE EDINGS, A FINDING IN ASSESSMENT PROCEEDINGS THAT A PARTICULAR RECEIPT IS INCOME CANNOT AUTOMATICALLY BE ADOPTED, THOUGH A FINDING IN THE ASSESSMENT PROCEEDINGS CONSTITUTES GOOD EVIDENCE IN THE PENALTY PROCEEDINGS. IN THE PENALTY PROCEEDINGS, THUS, THE AUT HORITIES MUST CONSIDER THE MATTER AFRESH AS THE QUESTION HAS TO BE CONSIDERED FROM A DIFFERENT ANGLE. THE CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS ARE DIFFERENT. BOTH CONCEALMENT AND FURNISHING INACCURATE PARTICULARS REFERS TO A DEL IBERATE ACT ON THE PART OF THE ASSESSEES. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSION VERI , SUGGESTIO FALS I. A LTHOUGH IT MAY NOT BE VERY ACCURATE OR APT BUT SUPPRESSIO VERI WOULD AMOUNT TO CONCEALMENT SUGGESTIO FALS I WOULD AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. 1 5 . THERE WAS A SEA CHANGE IN THE PERCEPTION WITH REGARD TO THE REQUISITE CONDITIONS FOR IMPOSING A PENALTY U/S 271(1)(C) AFTER THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE (SUPR A). IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) WHILE DEALING WITH THE PROVISIONS OF SECTION 11AC OF CENTRAL EXCISE ACT, THEIR LORDSHIP OF THE APEX COURT HAVE HELD THAT PROVISIONS OF SECTION 11AC INSERTED BY FINANCE ACT, 1996, WITH THE INTENTION OF IMPOSING MANDATORY PENALTY O N PERSONS WHO EVADED PAYMENT OF TAX CANNOT BE READ TO CONTAIN MENS REA AS AN ESSENTIAL INGREDIENT AND THERE IS NO DISCRETION WITH THE AUTHORITY COMPETENT TO IMPOSE ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 11 PENALTY BELOW THE PRESCRIBED MINIMUM. THEIR LORD SHIP HAVE ALSO MADE AN OBSERVATION WITH REGARD TO THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AND THEY HELD THAT OBJECT BEHIND ENACTMENT OF SECTION 271(1)(C) READ WITH EXPLANATIONS INDICATE THAT SAID SECTION HAS BEEN ENACTED TO PROV I DE FOR A REMEDY FOR LOS S OF REVENUE. PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITIES AS IS THE CASE IN THE MATTER OF PROSECUTION U/S 276C. THEREFORE, THE MENS REA IS NOT ESSENTIAL INGRED IENT OF SECTION 271(1)(C) AND THERE IS NO DISCRETION WITH THE AUTHORITY COMPETENT TO IMPOSING TO LEVY PENALTY BELOW THE PRESCRIBED MINIMUM. THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE WAS FURTHER EXAMINED BY THE APEX COURT IN THE CAS E OF RAJASTHAN SPINNING AND WEAVING MILLS AND THEIR LORDSHIP HAVE HELD THAT THE DECISION IN CASE OF UOI VS. DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) MUST BE UNDERSTOOD TO MEAN THAT THOUGH THE APPLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTE NCE OR OTHERWISE, OF THE CONDITIONS EXPRESSLY STATED IN THE SECTION, ONCE THE SECTION IS APPLICABLE IN A CASE, THE CONCERNED AUTHORITY WOULD HAVE NO DISCRETION IN QUANTIFYING THE AMOUNT AND PENALTY MUST BE IMPOSED EQUAL TO THE DUTY DETERMINED UNDER SUB - SEC TION 2 OF SECTION 11A. DECISION IN DHARMENDRA TEXTILE CANNOT BE SAID TO HOLD THAT SECTION 11AC WOULD APPLY TO EVERY CASE OF NON - PAYMENT OR SHORT PAYMENT OF DUTY REGARDLESS OF THE CONDITIONS EXPRESSLY MENTIONED IN THE SECTION FOR ITS APPLICATION. THIS JUD GEMENT ON DHARMENDRA TEXTILE (SUPRA) AND DILIP N. SHROFF (SUPRA) AND RAJASTHAN SPINNING AND WEAVING MILLS (SUPRA) OF THE APEX COURT WERE AGAIN EXAMINED BY THE APEX COURT IN THE CASE OF CIT VS. ATUL M OHAN BINDAL 317 ITR 1 (SC) AND HAVE HELD THAT IT GOES WIT HOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(1)(C) , CONDITION STATED THEREIN MUST EXIST . THE RELEVANT OBSERVATION OF THE APEX COURT ARE EXTRACTED HEREUNDER: A CLOSE LOOK AT SECTION 271(1)(C) AND EXPLANATION 1 APPENDED THERETO WOULD SHOW THAT IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, INTER ALIA, IF THE ASSESSING OFFICER IS SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, SUCH PERSON MAY BE DIRECTED TO PAY PENALTY. THE QUANTU M OF PENALTY IS PRESCRIBED IN CLAUSE (III). EXPLANATION 1, APPENDED TO SECTION 271(1) PROVIDES THAT IF THAT PERSON FAILS TO OFFER AN EXPLANATION OR THE ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 12 EXPLA - NATION OFFERED BY SUCH PERSON IS FOUND TO BE FALSE OR THE EXPLANATION OFFERED BY HIM IS NOT SUBSTA NTIATED AND HE FAILS TO PROVE THAT SUCH EXPLA - NATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, FOR THE PURPOSES OF SECTION 271(1)(C), THE AMOUNT ADDED OR DISALLO WED IN COMPUT ING THE TOTAL INCOME IS DEEMED TO REPRESENT THE CONCEALED INCOME. THE PENALTY SPOKEN OF IN SECTION 271(1)(C) IS NEITHER CRIMINAL NOR QUASI - CRIMINAL BUT A CIVIL LIABILITY ; ALBEIT A STRICT LIABILITY. SUCH LIABILITY BEING CIVIL IN NATURE, MENS R EA IS NOT ESSENTIAL. IN THE CASE OF UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 (SC), A THREE - JUDGE BENCH OF THIS COURT HELD THAT DILIP N. SHROFF* DID NOT LAY DOWN THE CORRECT LAW AS THE DIFFERENCE BETWEEN SECTION 271(1)(C) AND S ECTION 276C OF THE ACT WAS LOST SIGHT OF. THE COURT HELD THAT THE EXPLANATION APPENDED TO SECTION 271(1)(C) INDICATES THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING THE RETURN. THE COURT HE LD THUS: 'THE EXPLANATIONS APPENDED TO SECTION 271(1)(C) OF THE INCOME - TAX ACT ENTIRELY INDICATE THE ELEMENTS OF STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING THE RETURN. THE JUDGME NT IN DILIP N. SHRO FF' S CASE [2007] 291 ITR 519 (SC) HAS NOT CONSIDERED THE EFFECT AND RELEVANCE OF SECTION 276C OF THE INCOME - TAX ACT. THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1)(C) READ WITH EXPLANATIONS INDICATES THAT THE SECTION HAS BEEN ENACTED TO PROVIDE FOR A RE MEDY FOR LOSS OF REVENUE. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C.' THE DECISION OF THIS COURT IN DHARAMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 HAS BEEN EXPLAINED RECENTLY BY THIS COURT IN THE CASE OF UNION OF INDIA V. RAJASTHAN SPINNING AND WEAVING MILLS [2009] 8 SCALE 231 THUS : ' 20. AT THIS STAGE, WE NEED TO EXAMINE THE RECENT DECISION OF THIS COURT IN DHARAMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277. IN ALMOST EVERY CASE RELATING TO PENALTY, THE DECISION IS REFERRED TO ON BEHALF OF THE REVENUE AS IF IT LAID DOWN THAT IN EVERY CASE OF NON - PAYMENT OR SHORT PAYMENT OF DUTY THE PENALTY CL AUSE WOULD AUTOMATICALLY GET ATTRACTED AND THE AUTHORITY HAD NO DISCRETION IN THE MATTER. ONE OF US (AFTAB ALAM J.) WAS A PARTY TO THE DECISION IN DHARAMENDRA TEXTILE AND WE SEE NO REASON TO UNDERSTAND OR READ THAT DECISION IN THAT MANNER. IN DHARMENDRA TE XTILE THE COURT FRAMED THE ISSUES BEFORE IT, IN PARAGRAPH 2 OF THE DECISION AS FOLLOWS : ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 13 `2. A DIVISION BENCH OF THIS COURT HAS REFERRED THE CONTROVERSY INVOLVED IN THESE APPEALS TO A LARGER BENCH DOUBTING THE CORRECTNESS OF THE VIEW EXPRESSED IN DILIP N. SHROFF V. JOINT CIT [2007] 8 SCALE 304*. THE QUESTION WHICH ARISES FOR DETERMINATION IN ALL THESE APPEALS IS WHETHER SECTION 11AC OF THE CENTRAL EXCISE ACT, 1944 (IN SHORT ' THE ACT' ) INSERTED BY THE FINANCE ACT, 19 96, WITH THE INTENTION OF IMPOS ING MAN DATORY PENALTY ON PERSONS WHO EVADED PAYMENT OF TAX SHOULD BE READ TO CONTAIN MENS REA AS AN ESSENTIAL INGREDIENT AND WHETHER THERE IS A SCOPE FOR LEVYING PENALTY BELOW THE PRESCRIBED MINIMUM. BEFORE THE DIVISION BENCH, THE STAND OF THE REVENUE WAS THAT TH E SAID SECTION SHOULD BE READ AS PENALTY FOR STATUTORY OFFENCE AND THE AUTHORITY IMPOSING PENALTY HAS NO D ISCRETION IN THE MATTER OF IMPO SITION OF PENALTY AND THE ADJUDICATING AUTHORITY IN SUCH CASES WAS DUTY BOUND TO IMPOSE PENALTY EQUAL TO THE DUTIES SO DETERMINED. THE ASSESSEE ON THE OTHER HAND REFERRED TO SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961 (IN SHORT ' THE IT A CT' ) TAKING THE STAND THAT SEC TION 11AC OF THE ACT IS IDENTICALLY WORDED AND IN A GIVEN CASE IT WAS OPEN TO THE ASSESSING OFFICER NOT T O IMPOSE ANY PENALTY. THE DIVISION BENCH MADE REFERENCE TO RULE 96ZQ AND RULE 96ZO OF THE CENTRAL EXCISE RUL ES, 1944 (IN SHORT ' THE RULES' ) AND A DECISION OF THIS COURT IN CHAIRMAN, SEBI V. SHRIRAM MUTUAL FUND [2006] 5 SCC 361** AND WAS OF THE VIEW THAT T HE BASIC SCHEME FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, SECTION 11AC OF THE ACT AND RULE 96ZQ(5) OF THE RULES IS COMMON. ACCORDING TO THE DIVISION BENCH, THE CORRECT POSITION IN LAW WAS LAID DOWN IN CHAIRMAN, SEBI' S CASE [ 2006] 5 SCC 3612 AND NOT IN DILIP N. SHROFF' S CASE [2007] 8 SCALE 304*. THEREFORE, THE MATTER WAS REFERRED TO A LARGER BENCH' . AFTER REFERRING TO A NUMBER OF DECI SIONS ON INTERPRETATION AND CON STRUCTION OF STATUTORY PROVISION, IN P ARAGRAPHS 26 AND 27 OF THE DECI SION, THE COURT OBSERVED AND HELD AS FOLLOWS : `26. IN THE UNION BUDGET OF 1996 - 97, SECTION 11AC OF THE ACT WAS INTRODUCED. IT HAS MADE THE POSITION CLEAR THAT THERE IS NO SCOPE FOR ANY DISCRETION. IN PARA 136 OF THE UNION BUDGET REFERENCE HA S BEEN M ADE TO THE PROVISION STATING THAT THE LEVY OF PENALTY IS A MANDATORY PENALTY. IN THE NOTES ON CLAUSES ALSO THE SIMILAR INDICATION HAS BEEN GIVEN. 27. ABOVE BEING THE POSITION, THE PLEA THAT RULES 96ZQ AND 96ZO HAVE A CONCEPT OF DISCRETION INBUIL T CANNOT BE SUSTAINED. DILIP N. SHROFF' S CASE [2007] 8 SCALE 304 WAS NOT CORRECTLY DECIDED BUT CHAIR MAN, SEBI' S CASE [2006] 5 SCC 361 HAS ANALYSED THE LEGAL POSITION IN THE CORRECT PERSPECTIVES. THE REFERENCE IS ANSWERED . ' 21. FROM THE ABOVE, WE FAI L TO S EE HOW THE DECISION IN DHARAMEN DRA TEXTILE CAN BE SAID TO HOLD THAT SECTION 11C WOULD APPLY TO EVERY CASE OF NON - PAYMENT OR SHORT PAYMEN T OF DUTY ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 14 REGARDLESS OF THE CON DITIONS EXPRESSLY MENTIONED IN THE SECTION FOR ITS APPLICATION. 22. THERE IS ANO THER VERY STRON G REASON FOR HOLDING THAT DHARA MENDRA TEXTILE COULD NOT HAVE INTERPRETED SECTION 11AC IN THE MANNER AS SUGGESTED BECAUSE IN THAT CASE THAT WAS NOT EVEN THE STAND OF THE REVENUE. IN PARAGRAPH 5 OF THE DECISION, THE COURT NOTED THE SUBMISSION MADE ON BEHALF OF THE REVENUE AS FOLLOWS : `5. MR. CHANDRASHEKHARAN, ADDITIONAL SOLICITOR GENERAL SUB - MITTED THAT IN RULES 96ZQ AND 96ZO THERE IS NO REFERENCE TO ANY MENS REA AS IN SECTION 11AC WHERE MENS REA IS PRESCRIBED STATUTORILY. THIS IS CLEAR FRO M THE EXTENDED PERIOD OF L IMITATION PERMISSIBLE UNDER SEC TION 11A OF THE ACT. IT IS IN ESSENCE SUBMITTED THAT THE PENALTY IS FOR STATUTORY OFFENCE. IT IS POINTED OUT THAT THE PROVISO TO SECTION 11A DEALS WITH THE TIME FOR INITIATION OF ACTION. SECTION 11AC IS ONLY A MECHANISM FOR COMPUTATION AND THE QUANTUM OF PENALTY. IT IS STATED THAT THE CONSEQUENCES OF FRAUD, ETC., RELATE TO THE EXTENDED PERIOD OF LIMITATION AND THE ONUS IS ON THE REVENUE TO ESTABLISH THAT THE EXTENDED PERIOD OF LIMITATION IS APPLICABLE . ONCE THAT HURDLE IS CROSSED BY THE REVENUE, THE ASSESSEE IS EXPOSED TO PENALTY AND THE QUANTUM OF PENALTY IS FIXED. IT IS POINTED OUT THAT EVEN IF IN SOME STATUTES MENS REA IS SPECIFICALLY PROVID ED FOR, SO IS THE LIMIT OR IMPO SITION OF PENALTY, THAT IS T HE MAXIMUM FIXED OR THE QUANTUM HAS TO BE BETWEEN TWO LIMITS FIXED. IN THE CASES AT HAND, THERE IS NO VARIABLE AND, THEREFORE, NO DISCRETION. IT IS POINTED OUT THAT PRIOR TO INSERTION OF SECTION 11AC, RULE 173Q WAS IN VOGUE IN WHIC H NO MENS REA WAS PRO VIDE D FOR. IT ONLY STATED ' WHICH HE KNOWS OR HAS REASON TO BELIEVE' . THE SAID CLAUSE REFERRED TO WILFUL AC TION. ACCORDING TO LEARNED COUN SEL, WHICH WAS INFERENTIALLY PROVIDED IN SOME RESPECTS IN RULE 173Q STANDS EXPLICITLY PROVIDED IN SECTION 11AC. WHERE THE OUTER LIMIT OF PENALTY IS FIXED AND THE STATUTE PROVIDES THAT IT SHOULD NOT EXCEED A PARTICULAR LIMIT, THAT ITSELF INDICATES SCOPE FOR DISCRETION BUT THAT IS NOT THE CASE HERE.' 23. THE DECISION IN DHARAMENDRA TEXTILE MUST, THEREFORE, BE UNDERSTOOD TO MEAN THAT THOUGH THE APPLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTENCE OR OTHERWISE OF THE CONDITIONS EXPRESSLY STATED IN THE SECTION, ONCE THE SECTION IS APPLICABLE IN A CASE THE CONCERNED AUTHORITY WOULD HAVE NO DISCRETION IN QUANTIFYING THE AM OUNT AND PENALTY MUST BE IMPOSED EQUAL TO THE DUTY DETERMINED UNDER SUB - SECTION (2) OF SECTION 11 A. THAT IS WHAT DHARAMENDRA TEX TILE DECIDES.' IT GOES WITHOUT SAYING THAT FOR APPLICABILIT Y OF SECTION 271(1)(C), THE CON DITIONS STATED THEREIN MUST EXIST . ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 15 1 6 . THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE WAS ALSO EXAMINED BY THE VARIOUS HIGH COURTS IN THE CASE OF CIT VS. HARYANA W ARE HOUSING CORPORATION 314 ITR 215 AND CIT VS. SIDHARTHA ENTERPRISES 322 ITR 80. IN THE CASE OF SIDHARTH A ENTERPRISES (SUPRA) THEIR LORDSHIP OF THE PUNJAB & HARYANA HIGH COURT HAVE HELD THAT JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE (SUPRA) CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCUR ATE PENALTY MUST FOLLOW. WHAT HA S BEEN LAID DOWN IS THE QUALITATIVE DIFFERENCE BETWEEN CRIMINAL LIABILITY U/S 27 6C AND PENALTY U/S 271(1)(C) HAD TO BE KEPT IN MIND AND APPROACH ADOPTED TO THE TRIAL OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. EVEN SO, THE CONCEPT OF PENALTY HAS NOT UNDERGONE CHANGE BY VIRTUE OF THE JUDGEMENT. PENALT Y IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAKE. THIS BEING THE POSITION , THE FINDING HAVING BEEN R ECORDED ON FACTS THAT THE FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE THE TAX , THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE HELD TO BE PERVERSE. 1 7 . THE IMPACT OF JUDGEMENT OF DHARMENDRA TEXTILE WAS FURTHE R EXAMINED BY THE APEX COURT IN THE CASE OF CIT VS. RELIANCE PRODUCTS PVT. LTD. 322 ITR 158 IN WHICH THEIR LORDSHIP HAVE HELD THAT IT MUST BE SHOWN THAT CONDITION U/S 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTH ING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT , WHERE THE ASSESEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. IN DILIP N. SHROFF VS. JCIT (SUPRA), THIS C OURT EXPLAINED THE TERMS CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS . THIS COURT WENT ON TO HOLD THERE IN THAT IN ORDER TO ATTRACT PENALTY U/S 271(1)(C) , MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD INACCURATE SIGN IFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEES. IT ALSO WENT ON TO HOLD THAT CLAUSE (III) OF SECTION 271(1) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHORITY, IN AS MUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN T HE AMOUNT OF TAX SOUGHT TO BE EVADED BY ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 16 REASON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THERE OF. IT WAS POINTED OUT THAT TERMS INACCURATE PARTICULARS WAS NOT DEFIN ED ANY WHERE IN THE ACT AND , THEREFORE , IT WAS HEL D THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. IT WAS FURTHER HELD THAT ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY UNDER BONAFIDE BUT ALL THE FAC TS RELATING TO THE SAME AND MATERIAL TO COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. THE COURT ULTIMATELY WENT ON TO HOLD THAT ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THE JUDGEMENT IN THE CASE OF DILIP N SHROFF VS. JCIT (SUPRA) WAS UP SET BY THE APEX COURT THROUGH ITS JUDGEMENT IN THE CASE OF UOI VS. DHARMENDRA TEXTILE (SUPRA). IT WAS FURTHER CLARIFIED BY THE APEX COURT IN TH IS JUDGEMENT THAT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N. SHROFF VS. JCIT AND OTHERS (SUPRA) WHERE THE COURT EXPLAINED THE MEANING OF TERMS CONCEALED AND INACCURATE. THEREFORE, THE APEX COURT HAS FINALLY CONCLUDED IN THE CASE OF RELIANCE PRODUCTS THAT THE FINDINGS GIVEN IN DILIP N. SHROOF EXCEPT THE POINT OF MENS REA , HOLDS GOOD . O NLY THE FINDING THAT MENS REA WAS AN ESSENTIAL INGREDIENT FOR THE PENALTY U/S 271(1)(C) WAS O VER RULED IN THE CASE OF DHARMENDRA TEXTILE (SUPRA). 1 8 . THE SIMILAR VIEW WAS EX PRESSED BY THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SURESH CHAND BANSAL 223 CTR (CAL) 128 . F OLLOWING THE RATIO LAID DOWN IN THE AFORESAID JUDGEMENTS THE TRIBUNAL HAS CONCLUDED IN THE CASE OF ACIT VS. MALU ELECTRODES PVT. LIMITED 127 TTJ 599 THAT A M ERE FACT OF AGREED ADDITION DOES NOT RESULT INTO CONCLUSION THAT THE AMOUNT AGREED TO BE ADDED AS INCOME IS CONCEALED INCOME. IN SUCH A CASE, THE A.O. SHOULD FURTHER BRING SOME MATERIAL ON RECORD, SO THAT IT IS CONCLUSIVELY ESTABLISHED THAT SUCH SURRENDER , IN FACT, REPRESENTED THE REAL INCOME OR UNDISCLOSED INCOME OF THE ASSESSEES. THUS ON THE FACTS OF THE CASE PENALTY WAS NOT LEVIABLE IN RESPECT OF SURRENDER OF SHARE CAPITAL AS INCOME. THE RELEVANT OBSERVATION OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 17 MERE FACT OF AGREED ADDITION DOES NOT RESULT INTO A CONCLUSION THAT THE AMOUNT AGREED TO BE ADDED AS INCOME IS CONCEALED INCOME. IN SUCH A CASE, THE AO SHOULD FURTHER BRING SOME MATERIAL ON RECORD SO THAT IT IS CONCLUSIVELY ESTABLISHED THAT SUCH SURRENDE R, IN FACT, REPRESENTED THE REAL INCOME OR UNDISCLOSED INCOME OF THE ASSESSEE. GENERALLY, THE ASSESSEE AGREES FOR ADDITION TO BUY PEACE AND AVOID LITIGATION AND UNDER BONA FIDE BELIEF THAT THE PENALTY WOULD NOT BE LEVIED THEREAFTER. IT IS GENERALLY BELIE VED THAT THIS LEGITIMATE EXPECTATION OF THE ASSESSEE IS NOT BINDING ON THE AO BECAUSE THE ASSESSING AUTHORITY CANNOT MAKE A PROMISE AGAINST STATUTE. BUT WHEN THERE IS A DISCRETION WITH THE A.O., THEN, SUCH LEGITIMATE EXPECTATION SHOULD BE FULFILLED AS THE PRINCIPLE OF ESTOPPEL CAN BE APPLIED ONLY WHEN THERE IS NO DISCRETION. TO PUT IT DIFFERENTLY, THE AO BY NOT LEVYING PENALTY UNDER S. 271(1)(C), IN SUCH SITUATION WILL BE JUSTIFIED IN EXERCISING JUDICIAL DISCRETION GIVEN TO HIM BY THE LEGISLATURE. THIS I S ALSO SO FOR THE REASON THAT ALL THE OFFICIAL ACTS ARE PRESUMED TO BE DONE BONA FIDELY. FURTHER, IF THE OFFICIAL ACTS ARE PRESUMED TO BE DONE BONA FIDELY, THERE APPEARS TO BE NO REASON TO ASSUME THAT IT IS OTHERWISE FOR THE TAX PAYER. THUS, IN THIS VIEW OF THE MATTER, IN THE CASE OF AGREED ADDITIONS, WITHOUT GOING INTO THE TECHNICALITIES OF LEVIABILITY OF PENALTY UNDER S. 271(1)(C) PENALTY PROCEEDINGS SHOULD NOT BE INITIATED. IN THIS REGARD, IT IS OFTEN SAID THAT THE CONCEPT OF PLEA BARGAIN RECOGNIZED IN US JURISPRUDENCE IS UNKNOWN TO INDIAN LAW WHICH IS NOT CORRECT AS THERE ARE SPECIFIC PROVISIONS WHICH PROVIDE FOR NON - LEVY OR WAIVER OF PENALTY. WHEN IN CASE OF A SEARCH, THE ASSESSEE DECLARES CERTAIN UNDISCLOSED INCOME, THEN, HE IS SAVED FROM LEVY OF PENALTY. UNDISPUTEDLY EXERCISE OF SEARCH AND SEARCH ASSESSMENTS IS MORE RIGOROUS THAN ASSESSMENT PROCEEDINGS UNDER S. 143(3) IN NORMAL COURSE AND WHEN AN ASSESSEE, IN THOSE SITUATIONS, CAN BE EXEMPT FROM LEVY OF PENALTY UNDER S. 271(1)(C) THERE IS NO REA SON THAT IN CASE OF AGREED ADDITIONS EVEN THOUGH THE SAME MAY BE AFTER SOME EXERCISE BY THE AO, PENALTY UNDER S. 271(1)(C) CANNOT BE WAIVED. CONCEPT OF PLEA BARGAIN IS RECOGNIZED IN THE IT ACT, 1961, IN SPECIFIC SITUATIONS AS WELL AS BY GIVING DISCRETION TO THE AO TO LEVY OR NOT TO LEVY PENALTY UNDER S. 271(1)(C), HENCE, THE AO, IN CASE OF AGREED ADDITIONS, SHOULD NOT LEVY PENALTY UNDER S. 271(1)(C). FURTHER IF IT IS ASSUMED THAT THE ASSESSEE, IN THE PRESENT CASE, INSTEAD OF AGREEING FOR ADDITION WOULD H AVE CONTESTED THE MATTER, THEN, PERHAPS IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2008) 6 DTR (SC) 308, EVEN ADDITION COULD NOT BE MADE OR COULD NOT HAVE BEEN SUSTAINED. FURTHER, SUCH COURSE OF ACTION WOU LD HAVE MADE IT POSSIBLE TO THE ASSESSEE TO PLEAD VARIOUS REASONS WHICH WOULD HAVE ENABLED THE ASSESSEE TO GET THE BENEFIT OF DOUBT. HENCE, WHEN AN ASSESSEE ACTS IN A MANNER WHICH RESULTS INTO AN ADDITIONAL REVENUE IN A SMOOTH MANNER, THEN, PENALTY UNDER S. 271(1)(C) SHOULD NOT BE LEVIED WHICH WOULD ENCOURAGE THE ASSESSEE TO COME OUT CLEAN ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 18 WITHOUT FEAR OF PENALTY OR PROSECUTION AND THAT COULD SERVE THE PURPOSE OF PROVISIONS OF S. 271(1)(C) MORE EFFECTIVELY. 1 9 . AGAIN IN THE CASE OF RAJESH C. GANDHI VS. I TO ITA 3158/MUMBAI/09 TRIBUNAL HAS EXAMINED THE ISSUE WHETHER PENALTY CAN BE LEVIED ON SURRENDERED ADDITIONAL INCOME IN THE LIGHT OF AFORESAID JUDGEMENTS AND FINALLY CAME TO THE CONCLUSION THAT ON A VOLUNTARY DISCLOSURE OR A SURRENDERED INCOME PENALTY U/S 271(1)(C) SHOULD NOT BE LEVIED. THE RELEVANT OBSERVATION OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: IN THE LIGHT OF THE ABOVE DISCUSSION, IF WE CONSIDER THE FACTS OF THE CASE UNDER CONSIDERATION, WE FIND THAT THE ALLEGATION OF THE REVENUE IS THAT THE AO HAS DETECTED CONCEALMENT OF PARTICULARS OF INCOME. THE A.O. CAME TO KNOW CONCEALMENT FROM AIR. EXPLANATION OF THE ASSESSEE WAS THAT THE ASSESSEE HAS SURRENDERED ADDITIONAL INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY FILING REVISED RETURN BEFOR E RECORDING SATISFACTION REGARDING CONCEALMENT/BEFORE REACHING FINAL CONCLUSION ON DETECTION OF CONCEALMENT OF PARTICULARS OF INCOME. THE ASSESSEE EXPLAINED THE REASONS OF REVISED RETURN, WHICH IS REPRODUCED IN PARA 3 OF THIS ORDER. THE CIT(A) HELD THAT THE EXPLANATION OF THE ASSESSEE WAS CONSIDERED AS FALSE BY THE A.O. KEEPING IN VIEW THE DISCUSSION MADE IN PARA 5.2 OF THIS ORDER, WHAT IS FALSE, WE NOTICED THAT THIS FINDING OF CIT(A) IS GENERAL FINDING WITHOUT BASE ON ANY MATERIAL. THAT MERE REJECTION OF THE EXPLANATION CANNOT BE SAID TO BE FALSE UNLESS SOMETHING IS FOUND TO BE FALSE. IF WE SEE THE PROCEEDING SHEET OF THE AO, OF WHICH, A COPY HAS BEEN PLACED ON RECORD/IN THE PAPER BOOK, WE FIND THAT THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER C ASS AND NOTICE U/S 143(2) WAS ISSUED ALONG WITH ONE QUERY LETTER ON 26 TH JULY, 2006 WHEREIN THE AO DID NOT ASK ANY SPECIFIC INFORMATION OR RAISED ANY QUERY REGARDING ADDITIONAL INCOME SURRENDERED BY THE ASSESSEE. THE ASSESSEE FILED REVISED RETURN ON 29 TH AUGUST, 2007 AND, THEREAFTER, THE AO STARTED VERIFICATION FROM THE BANK AND OTHERS BUT FINALLY ACCEPTED THE INCOME SURRENDERED BY THE ASSESSEE IN THE REVISED RETURN. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE HAS SU RRENDERED THE INCOME DURING THE ASSESSMENT PROCEEDINGS BEFORE ANY SATISFACTION RECORDED BY THE AO THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. WE ALSO NOTICED THAT THE EXPLANATION FURNISHED BY THE AS SESSEE ALSO BONAFIDE EXPLANATION SO FAR AS THE PENALTY U/S 271(1)(C) IS CONCERNED. WE ARE, THEREFORE, OF THE VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THEREFORE, WE HEREBY CANCEL THE PENALTY OF RS.37,89,520/ - LEVIED B Y THE AO U/S 271(1)(C) AND CONFIRMED BY THE CIT(A). ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 19 20 . IN THE CASE OF ADDITIONAL CIT VS. PREM CHAND GARG, 119 ITD 97 (TM) SIMILAR QUESTION WAS AGAIN RAISED AS TO WHETHER THE PENALTY ON VOLUNTARY SURRENDERED INCOME CAN BE LEVIED. THE MAJORITY VIEW OF THI S TRIBUNAL IN THIS CASE WAS THAT THE ASSESSEE HA D NOT REVISED THE RETURNS OR THAT THE OFFER WAS BY LETTER TO AVOID HARASSMENT TO THE ASSESSEE AND THE DONORS WHO WERE NON - RESIDENT PERSONS , IT CANNOT CONVERT AN OFFER TO TAX AS CONCEALMENT OF INCOME. THERE W AS NEITHER ANY DEDUCTION NOR ANY INFORMATION IN THE POS SESSION OF THE REVENUE NOR THE M ANNER OF ITS COMMUNICATION TO THE ASSESSEE WHICH MIGHT LED TO A DEDUCTION OF A CONCEALMENT. MERELY BECAUSE THE ASSESSEE HAS AGREED TO THE ASSESSMENT THAT CANNOT BRING AUTOMATIC LEVY OF PENALTY. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: THOUGH A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 31 ST MAY, 2003, BUT NO INDISCRIMINATING MATERIAL WAS FOUND THEREIN. IT SEEMS THAT CONSEQUENT UPON THE SEARCH IN RESPONSE TO A NOTICE UNDER S. 153A THE ASSESSEE OPTED THAT THE ORIGINAL RETURN BE TAKEN AS A RETURN UNDER THE AFORESAID PROVISION. THEREAFTER, A QUESTIONNAIRE WAS ISSUED REQUIRING THE ASSESSEE TO INTER ALIA FILE THE DETAILS OF LOANS AND GIFTS GI VEN OR TAKEN IN THIS YEAR. THE ASSESSEE FURNISHED THE DETAILS OF THE GIFTS FROM NRI PERSONS, FURNISHED COPIES OF GIFT DEED. THE RECEIPT OF GIFTS IS THROUGH BANKING CHANNEL. THE COURSE OF EVENT NARRATED ABOVE SHOWED THAT THE A.O. DID NOT HAVE ANY INFORMAT ION TO COME TO THE CONCLUSION THAT THE GIFTS WERE NOT GENUINE SO AS TO TREAT THEM AS UNDISCLOSED INCOME OF THE ASSESSEE. UNTIL THIS STAGE THERE WAS NOTHING ON RECORD ABOUT THE GIFTS AND WITHIN FOUR DAYS OF THE RECEIPT OF THIS NOTICE, THE ASSESSEE OFFERED THE AMOUNTS OF GIFTS FOR TAXATION BY WAY OF A LETTER. THE ASSESSMENTS WERE COMPLETED ON THE BASIS OF THE RETURNS AND THE SURRENDER MADE BY THE ASSESSEE WITHOUT FURTHER GOING INTO ANY DETAILS OF THE GIFTS. THIS FACT, BY ITSELF, IT IS TRUE, MAY NOT LEAD TO A CONCLUSION THAT THE ASSESSEE HAD NOT FURNISHED INACCURATE PARTICULARS OF INCOME IN THE RETURNS FILED BY HIM BUT CANNOT BE LOST SIGHT OF IN THE LIGHT OF THE FACT THAT THERE IS NO MATERIAL ON RECORD ALSO TO SUGGEST THAT ASSESSEE CONCEALED PARTICULARS OF I NCOME, THERE BEING NO MENTION OF THE IMPUGNED GIFTS IN THE RETURNS OR AS ADDITION BY WAY OF CAPITAL ANNEXED WITH THE RETURNS. THE POSITION REGARDING GENUINENESS OR OTHERWISE OF THE GIFTS REMAINED THE SAME AT THE TIME OF FILING THE RETURN AND AFTER RECEIPT OF THE QUESTIONNAIRE. BY OFFER MADE BY THE ASSESSEE, ONE MAY INFER THAT AT ALL TIMES THE ASSESSEE WAS AWARE THAT SOMETHING WAS AMISS WITH REGARD TO GIFTS. BUT IN VIEW OF THE AFFIDAVITS AND THE GIFT DEEDS FILED IT MIGHT NOT BE CONCLUDED THAT IT WAS SURE CASE OF INGENUINENESS OF ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 20 THE GIFTS. IT CANNOT BE SAID THAT HE WOULD NOT BE ABLE TO DISCHARGE THE INITIAL BURDEN CAST ON HIM UNDER S. 68. IN ANY CASE THE ASSESSEE COULD BE SAID TO HAVE SUBSTANTIATED ITS EXPLANATION AS REGARDS TO EXPLANATION TO S. 271(1)(C ). THE GIFTS ARE SURRENDERED TO BE TAXED IN ORDER TO BUY PEACE AND TO AVOID LITIGATION IN THE MATTER. IT WAS MADE SUBJECT TO THE CONDITION THAT PENALTY PROCEEDINGS BE NOT INITIATED. IT IS TRUE THAT LETTER OF SURRENDER DOES NOT OBLITERATE THE ORIGINAL RE TURN AND SUPPRESSION OF INCOME THEREIN BUT WHEN THE SURRENDER WAS MADE BEFORE DETECTION OR WITHOUT A NY MATERIAL ON RECORD SUGGESTING INCOME WITHHELD, IT WOULD BE A CASE OF VOLUNTARY OFFER AND WOULD IN THAT CASE BE NOT A CONCEALMENT OF INCOME BY THE ASSESSE E. IT IS TRUE THAT THE ASSESSMENTS CANNOT BE MADE BY BARGAINING AND THE AO IS WITHIN HIS RIGHT TO CONSIDER THE WHOLE ISSUE AS PER LAW FOR INITIATION AND LEVY OF THE PENALTY, BUT ON THE BASIS OF MATERIAL ON RECORD. IT WAS A VOLUNTARY ACTION OF THE ASSESSE E TO COME FORWARD AND STATE ITS TRUE INCOME AND THEREFORE IT WOULD NOT BE A CASE OF CONCEALMENT BY THE ASSESSEE AT THE TIME WHEN THE ASSESSMENT WAS TAKEN UP. AFTER THE DECISION OF THE SUPREME COURT IN UNION OF INDIA VS. DHARMENDRA TEXTILE IT IS ONLY A CIV IL LIABILITY AND THEREFORE DECISION OF THE SUPREME COURT IN K.C. BUILDERS & ANR. VS. ASST. CIT (2004) 186 CTR (SC) 721 : (2004) 265 ITR 562 (SC) HOLDING THAT THE WORD CONCEALMENT INHERENTLY INVOLVES THE MENTAL CONDITION OF THE ASSESSEE WITH REGARD TO THE DEFAULT MAY NOT BE A GOOD LAW. HOWEVER, THAT DOES NOT MEAN THAT THE PROVISION CONTAINED IN EXPLN. 1 ARE GIVEN A COMPLETE GO BYE AND ARE NOT APPLICABLE. THE SURRENDER OF THE AMOUNT AFTER RECEIPT OF THE QUESTIONNAIRE CANNOT LEAD TO AN INFERENCE THAT IT WA S NOT VOLUNTARY IN ABSENCE OF ANY MATERIAL ON RECORD SUGGESTING IT TO BE BOGUS OR UNTRUE OR THE INCOME OF THE ASSESSEE BEFORE SUCH SURRENDER. CIT VS. SURESH CHANDRA MITTAL (2001) 170 CTR (SC) 182 : (2001) 251 ITR 9 (SC) RELIED ON; K.P. MADHUSUDHANAN VS. C IT (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC) DISTINGUISHED. 21 . TURNING TO THE FACTS OF THE CASE IN THE LIGHT OF LEGAL PROPOSITIONS LAID DOWN THROUGH VARIOUS JUDICIAL PRONOUNCEMENTS IN THE AFORESAID CASES, WE FIND THAT DURING THE COURSE OF SEARCH, DIRECTOR OF THE COMPANY M/S. JAN CHAITANYA HOUSING PRIVATE LIMITED CAME FORWARD AND OFFERED THE UNDISCLOSED INCOME IN THE HANDS OF COMPANY AS WELL AS THE INDIVIDUAL DURING THE COURSE OF H ER EXAMINATION U/S 132(4) AND PAID THE TAXES THERE ON. WHILE FILING A RETURN OF INCOME IN RESPONSE TO NOTICE 153C OF THE ACT , THE ASSESSEE S HA VE MADE A SPECIFIC DECLARATION THERE UNDER IN THE COMPUTATION OF INCOME THAT DUE TO PAUCITY OF TIME EXTENSIVE VERIFICATION COULD NOT BE COMPLETED THEREFORE THEY UNDERTAKE TO OFFER A DDITIONAL INCOME IN ADDITION TO WHAT THEY HAVE DISCLOSED IN THE RETURN OF INCOME. IF ANY OMISSIONS ARE NOTICED DURING THE COURSE OF ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 21 ASSESSMENT PROCEEDINGS SUBJECT TO NOT LEVY OF PENALTY U/S 271(1)(C) OF THE ACT . THE ASSESSEES DI D NOT STOP THERE. THEY F URTHER FILED A LETTER DURING THE ASS ESSMENT PROCEEDINGS AND MADE DECLARATION THAT THEY ARE READY TO OFFER SUCH DIFFERENCE AMOUNT NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS AN ADDITIONAL INCOME. THE CONDUCT OF THE ASSESSEES CLEARLY SHOW THAT SI NCE BEGINNING THEY WERE READY TO OFFER THE ADDITIONAL INCOME ON THE BASIS OF THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH AND THEY HAD NO INTENTION TO JUSTIFY OR TO FURNISH ANY OTHER EXPLANATIONS ON THE OMISSIONS FOUND IN THE SEIZED MATERIAL AS THEY WER E NOT INTERESTED IN PROTRACTED LITIGATION. THEREFORE, THEY MADE A VOLUNTARY DISCLOSURE OR OFFERED ADDITIONAL INCOME TO PURCHASE PEACE WITH THE DEPARTMENT , SUBJECT TO NON - LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE REVENUE HAS MADE THE ADDITION ON AGREE MENT BASIS . THEY HAVE NOT BROUGHT ANYTHING ON RECORD TO ESTABLISH THAT THE ASSESSEES HAVE EITHER CONCEALED THE INCOME OR FURNISH ED THE INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE, IN SUCH A SITUATION, WE ARE OF THE VIEW THAT PENALTY U/S 271(1)(C) CA NNOT BE LEVIED. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) IN ALL THESE APPEALS AND DELETE THE PENALTY LEVIED U/S 271(1)(C) IN ALL THE APPEALS. 2 2 . IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25.11 .20 10 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 25 TH NOVEMBER , 20 10 ITA NOS.131 TO 143/VIZ/2010 M. SHAKUNTHALAMMA, GUNTUR 22 C OPY TO 1 SMT. M. SHAKUNTHALAMMA, DIRECTOR, JANACHAITANYA HOUSING LTD ., 1 ST FLOOR, PASUMALAI COMPLEX, 5/1, ARUNDELPET, GUNTUR - 522 002 2 SRI M. SUDHAKAR, MANAGING DIRECTOR, JANACHAITANYA HOUSING LTD., 1 ST FLOOR, PASUMALAI COMPLEX, 5/1, ARUNDELPET, GUNTUR - 522 002. 3 M/S. JANACHAITANYA HOUSING LTD., 1 ST FLOOR, PASUMALAI COMP LEX, 5/1, ARUNDELPET, GUNTUR - 522 002. 2 ACIT, CIRCLE - 2(1), GUNTUR 3 THE CI T, GUNTUR 4 THE CIT (A) , GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLA TE TRIBUNAL VISAKHAPATNAM