Appeal Details
Counselvise Citation
189620114 RSA 2010
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 6 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-11-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
03-11-2011
Assessment Year
2004-2005
Appeal Filed On
28-04-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E DELHI) BEFORE SHRI G.D. AGARWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 1896(DEL)2010 ASSESSMENT YEAR: 2004-05 M/S. MAK DATA LIMITED, INCOME TAX OFFICER, E-58, GREATER KAILASH PART I, NEW DELHI. V. WARD 6(2), NEW DELHI. (APPELLANT) ( RESPONDENT) APPELLANT BY: SHRI VED JAIN & MRS. RANO JAIN, CA S RESPONDENT BY: SHRI R.S . NEGI, SR. DR ORDER PER A.D. JAIN, J.M . THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 004-05 AGAINST THE ORDER DATED 17.2.2010 PASSED BY THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS), IX, NEW DELHI, CONFIRMING THE PENALTY OF ` 14,61,547/-, IMPOSED ON THE ASSESSEE U/S 271(1) (C) OF THE INCOM E TAX ACT. THE FOLLOWING GROUNDS HAVE BEEN TAKEN:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE OR DER PASSED BY THE LD. CIT(A) IS BAD, BOTH IN THE EYE OF LAW AND ON FACTS. ITA 1896(DEL)2010 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN IGNORING TH E CONTENTION OF THE APPELLANT THAT NO PENALTY IS LEVI ABLE AS THE APPELLANT HAS SURRENDERED THE INCOME SUO-MOTTO AND AS SUCH THERE IS NEITHER CONCEALMENT NOR FURNISHING INACCURATE PARTICULARS OF INCOME. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE PENALTY AS THE ADDITIONS WAS MADE ONLY ON THE BASIS OF SURRENDER MADE BY THE ASSESSEE AND NOT WITH REFEREN CE TO ANY DOCUMENTARY EVIDENCE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN REJECTING T HE CONTENTION OF THE ASSESSEE THAT THE LEVY OF PENALTY IS UNTENABLE NO FINDING HAS BEEN GIVEN ON MERIT REGARD ING CONCEALMENT IN THE PENALTY ORDER PASSED BY THE AO. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN REJECTING T HE CONTENTION OF THE APPELLANT THAT THE ORDER PASSED B Y THE AO LEVYING PENALTY IS UNTENABLE IN THE EYE OF LAW A S NO SATISFACTION, AS REQUIRED UNDER THE LAW, HAS BEEN R ECORDED BY THE AO IN THE ASSESSMENT ORDER. 2. THE FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAG ED IN THE BUSINESS OF EARNING COMMISSION FROM SALE OF HEAVY MACHINES AND RUNNING OF HOTEL. DURING THE YEAR, IT SHOWED TOTAL RECEIPTS OF ` 84,81,498/- AS AGAINST ` 45,22,539/- OF THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. IT DECLARED NET PROFIT OF ` 32,11,376/- AGAINST THAT OF ` 9,59,880/- OF THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. A SURVEY WAS CONDUCTED ON 16.12.2003, IN THE ITA 1896(DEL)2010 3 CASE OF MARKETING SERVICES, NEW DELHI. SOME DOCUM ENTS PERTAINING TO THE ASSESSEE COMPANY WERE FOUND AND IMPOUNDED. THESE DOCUMENTS COMPRISED OF SIGNED BLANK TRANSFER DEEDS, MOA OF COMPANIES, A FFIDAVITS, SHARE APPLICATION FORMS, COPY OF BANK ACCOUNT, COPIES OF INCOME TAX RETURNS AND ASSESSMENT ORDERS. ETC. THESE DOCUMENTS WERE FORW ARDED TO THE AO OF THE ASSESSEE COMPANY. THE AO FOUND THAT THE DOCUMENTS BELONGED TO SOME COMPANIES/FIRMS/INDIVIDUALS, WHO HAD APPLIED FOR TH E SHARES IN THE ASSESSEE COMPANY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THESE DOCUMENTS HAD BEEN LYING WITH THEM AND TO PROVE THE GENUINENE SS OF THE TRANSACTIONS AND THE CREDIT WORTHINESS OF THE PERSONS AND THE SO URCE OF THE INVESTMENT, BY PRODUCING THE PERSONS. THE ASSESSEE FILED REPLY DA TED 22.11.2006. THEREIN, IT WAS STATED THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY FROM DIFFERENT ENTITIES, AMOUNTING TO ` 2,39,00,000/- DURING THE PAST THREE YEARS, AS FOLLOWS:- ASSESSMENT YEAR AMOUNT ` 2002-03 12,00,000/- 2003-04 1,06,50,000/- 2004-05 1,20,50,000/- ------- ------------ TOTAL: 2,39,00,0 00/- ======== === ITA 1896(DEL)2010 4 3. THE ASSESSEE COMPANY OFFERED TO SURRENDER A SUM OF ` 56.49 LAKHS AS INCOME FROM OTHER SOURCES, STATEDLY WITH A VIEW TO AVOID LITIGATION AND TO BUY PEACE AND TO CHANNELISE THE ENERGY AND RESOURC ES TOWARDS PRODUCTIVE WORK AND TO MAKE AMICABLE SETTLEMENT WITH THE DEPAR TMENT. IT WAS FURTHER STATED THAT SHRI V.K. AGGARWAL, PROMOTER DIRECTOR O F THE COMPANY HAD OFFERED A SUM OF ` 1,82,51,000/- FOR TAXATION AS INCOME FROM OTHER SOU RCES IN THE HANDS OF THE PARTNERSHIP FIRM, M/S. MARKETING S ERVICES, WHICH WAS BEING ASSESSED WITH THE CIT, XI, NEW DELHI; THAT THIS INC OME OF ` 1,82,51,000/- HAD BEEN DULY SUBJECTED TO TAX BY THE CIT,XI, AS FO LLOWS:- ASSESSMENT YEAR AMOUNT ` 2001-02 48,97,000/- 2002-03 40,68,000/- 2003-04 92,86,000/- ----- --------------- TOTAL: 1,82,51,000/- ========= ===== 4. IT WAS FURTHER STATED THAT SHRI V.K. AGGARWAL H AD UTILIZED THIS OFFERED SUM OF ` 1,82,51,000/- FOR INDUCTING FUNDS INTO THE BOOKS OF THE ASSESSEE COMPANY AS SHARE APPLICATION MONEY; THAT THE ADDITI ONAL FUND FLOW TO THE EXTENT OF ` 56,49,000/-, I.E., THE DIFFERENCE BETWEEN ` 2,39,00,000/- AND ` ITA 1896(DEL)2010 5 1,82,51,000/-, WHICH REMAINED UNEXPLAINED WAS, AT T HAT STAGE, BEING OFFERED FOR TAXATION BY THE COMPANY AS ITS INCOME FROM OTHE R SOURCES, SUBJECT TO THE CONDITION THAT OFFER OF THE SURRENDER WAS BY WAY OF VOLUNTARY DISCLOSURE WITHOUT ADMITTING ANY CONCEALMENT OR ANY INTENTION TO CONCEAL AND SUBJECT TO NON-INITIATION OF PENALTY PROCEEDINGS AND PROSECUTI ON. 5. LATER, THE ASSESSEE FILED A PETITION U/S 144 A O F THE I.T. ACT BEFORE THE ACIT, FOR EXPEDITING THE ASSESSMENT PROCEEDINGS. A COPY THEREOF WAS FORWARDED TO THE AO. IN THE SAID PETITION, THE ASS ESSEE COMPANY SHOWED ITS WILLINGNESS TO BE TAXED OF ` 56,49,000/-, AS THE COMPANYS INCOME FROM OTHER SOURCES. 6. VIDE LETTER DATED 27.11.2006 THE ACIT CALLED FOR SOME DOCUMENTS AND INFORMATION FROM THE ASSESSEE. THE ADDL. CIT ASKE D THE AO OF MARKETING SERVICES TO SUBMIT A DETAILED REPORT THEREON. THE AO WAS ASKED TO SUPPLY THE FOLLOWING DOCUMENTS:- A) PHOTOCOPY OF ALL THE STATEMENTS RECORDED DURING THE COURSE OF SURVEY OPERATION. B) COPY OF ANY COMMUNICATION REFERENCE REGARDING UTILIZATION OF THE OFFERED SUM. C) COPIES OF ALL THE RETURNS ALONG WITH BALANCE SHEET, P&L A/C, PARTNERS CAPITAL A/C AND OTHER ANNEXURE IN RES PECT OF ITA 1896(DEL)2010 6 M/S MARKETING SERVICES ALONG WITH COPIES OF RETURNS OF THE PARTNERS FOR THE ASSESSMENT YEAR 2001-02 TO A.Y. 20 06-07. D) COPIES OF THE ASSESSMENT ORDERS PASSED FOR THE ABOV E ASSESSMENT YEARS AND PENALTY ORDER IF ANY. E) COPIES OF ANY OTHER DOCUMENTS/EVIDENCE/RECORD WHICH MIGHT BE USEFUL FOR THE PURPOSE OF FRAMING ASSESSME NT IN THE CASE OF THAT ASSESSEE. 7. THE AO OF MARKETING SERVICES SUPPLIED THE DOCUME NTS ONLY PARTIALLY, I.E., COPIES OF RETURN ALONG WITH ANNEXURES AND COP IES OF ASSESSMENT ORDERS FOR THE PERIOD FROM ASSESSMENT YEAR 2002-03 TO 2004 -05. HE STATED IN HIS LETTER DATED 13.12.2006, THAT HIS OFFICE DID NOT H AVE ANY STATEMENT RECORDED DURING THE SURVEY OPERATIONS; THAT NO OTHER COMMUNI CATION REGARDING UTILIZATION OF THE OFFERED SUM WAS AVAILABLE; AND T HAT FURTHER, HE DID NOT HAVE ANY DOCUMENTS/EVIDENCE/RECORDS WHICH MIGHT BE USEFU L FOR THE PURPOSE OF FRAMING ASSESSMENT IN RESPECT OF THE ASSESSEE. 8. THE ASSESSEE OFFERED TO SURRENDER ADDITIONAL INC OME TO THE TUNE OF ` 14,24,00,000/-. SHRI V.K. AGGARWAL FILED AN AFFIDA VIT STATING THAT NEITHER HE NOR THE OTHER PARTNERS OF THE FIRM HAD TAKEN BENEFI T OF THE SURRENDERED AMOUNT DURING THE SURVEY IN THE CASE OF MARKETING S ERVICES. DIRECTIONS DATED 27.12.2006 WERE ISSUED U/S 144A OF THE ACT. THEREIN, IT WAS, INTER ALIA, OBSERVED THAT THE SURRENDERED AMOUNT OF ` 1,82,51,000/-, WHICH HAD ITA 1896(DEL)2010 7 BEEN SUBJECTED TO TAX IN THE HANDS OF M/S. MARKETIN G SERVICES IN THE ASSESSMENT YEARS 2001-02 TO 2003-04, HAD NOT BEEN I NTRODUCED IN THE BOOKS OF ACCOUNT OF THE FIRM IN THE YEARS IN WHICH IT HAD OFFERED FOR TAX OR THEREAFTER; THAT THERE WAS ALSO NO DOCUMENT/INFORMA TION/DETAIL TO SUGGEST THAT THIS SURRENDERED AMOUNT HAD BEEN INVESTED ELSEWHERE ; THAT SHRI V.K. AGGARWAL HAD FILED AN AFFIDAVIT TO THE EFFECT THAT THE AMOUNTS SURRENDERED IN THE HANDS OF M/S. MARKETING SERVICES HAD BEEN UTILI ZED BY HIM AS SHARE APPLICATION MONEY AND NO-WHERE ELSE; THAT IT HAD AL SO BEEN EXPLAINED THAT THE FUNDS OF ` 1,82,51,000/- INDUCTED IN THE BOOKS OF THE ASSESSEE COMPANY AS SHARE APPLICATION MONEY IN DIFFERENT YEARS, ACTUAL LY BELONGED TO M/S. MARKETING SERVICES, IN WHICH, SHRI V.K. AGGARWAL, T HE PROMOTER DIRECTOR OF THE ASSESSEE COMPANY WAS A PARTNER AND THIS AMOUNT HAD LATER ON OFFERED FOR TAX BY HIM IN THE HANDS OF M/S. MARKETING SERVICES IN DIFFERENT ASSESSMENT YEARS AND THE SAME HAD BEEN ALSO SUBJECTED TO TAX I N THE HANDS OF THE FIRM; THAT IT HAD ALSO BEEN EXPLAINED THAT SINCE THE FUND S TO THE EXTENT OF ` 1,82,51,000/- STOOD ALREADY INDUCTED IN THE BOOKS O F THE COMPANY AS SHARE APPLICATION MONEY BEFORE IT WAS OFFERED TO TAX IN T HE HANDS OF M/S. MARKETING SERVICES, THERE COULD NOT BE ANY OCCASION TO AGAIN INTRODUCE THE SAME AMOUNT IN THE BOOKS OF THE FIRM, M/S. MARKETIN G SERVICES; THAT IN THE SAID FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIE W OF THE FACT THAT NO ITA 1896(DEL)2010 8 ADVERSE INFERENCE WAS POSSIBLE TO BE DRAWN A GAINST THE ASSESSEE COMPANY AGAINST THE INDUCTION OF SHARE APPLICATI ON MONEY TO THE EXTENT OF ` 1,82,51,000/-, THE SOURCE OF THE SHARE APPLICATION MONEY TO THE SAID EXTENT MAY BE TREATED AS EXPLAINED; THAT MORE-OVER, THE SHARE APPLICATION MONEY TO THE EXTENT OF ` 1,82,51,000/- HAD ALREADY BEEN SUBJECTED TO TAX IN THE HANDS OF M/S. MARKETING SERVICES AND IT COULD N OT BE TAXED AGAIN IN THE HANDS OF THE RECIPIENT; THAT THE AO WAS, AS SUCH, B EING REQUESTED TO ACCEPT THE ASSESSEES EXPLANATION REGARDING THE SOURCE OF THE SHARE APPLICATION MONEY TO THE EXTENT OF ` 1,82,51,000/-, SUBJECT TO ENSURING AGAIN THAT THE SURRENDERED AMOUNT HAD BEEN INVESTED OR UTILIZED EL SEWHERE, EXCEPT AS STATED BY THE ASSESSEE; THAT AS REGARDS THE BALANCE AMOUNT OF SHARE APPLICATION MONEY OF ` 40,24,000/-, THE ASSESSEE HAD ITSELF STATED IT AS U NEXPLAINED AND HAD VOLUNTARILY SHOWN ITS WILLINGNESS TO OFFER TO S URRENDER A FURTHER SUM OF ` 40,24,000/-, FOR TAX; AND THAT THE AO MAY ACCEPT TH E ASSESSEES OFFER SUBJECT TO VERIFICATION AS SUGGESTED AND BRING THE SAID AMO UNT TO TAX. 9. THE AO, ON VERIFICATION, RECALCULATED THE SURREN DERED AMOUNT TO ` 40,74,000/-. THE INCOME OF THE ASSESSEE WAS ASSES SED AT ` 57,56,700/-. 10. IN THE PENALTY PROCEEDINGS, IT WAS THE STAND OF THE ASSESSEE THAT THE PENALTY PROCEEDINGS WERE NOT MAINTAINABLE FOR THE R EASON THAT THE AO HAD ITA 1896(DEL)2010 9 NOT RECORDED HIS SATISFACTION OF THERE BEING EITHER CONCEALMENT OF INCOME OR FURNISHING OF ANY INACCURATE PARTICULARS OF ITS INC OME BY THE ASSESSEE; THAT THE SURRENDER HAD BEEN MADE SUBJECT TO THE CONDITIO N THAT NO PENALTY BE IMPOSED, THE OFFER TO SURRENDER THE INCOME HAVING B EEN MADE BEFORE ANY INVESTIGATION INTO THE MATTER; AND THAT IT COULD NO T BE SAID THAT THE SURRENDER HAD BEEN MADE ONLY AFTER CONCEALMENT OF INCOME HAD BEEN DEDUCTED BY THE DEPARTMENT. 11. THE STAND TAKEN BY THE ASSESSEE WAS REJECTED BY THE AO, OBSERVING THAT THE ASSESSEE HAD NOT OFFERED THE AMOUNT OF ` 40,74,000/- FOR TAXATION VOLUNTARILY; THAT THE SURRENDER HAD COME ABOUT DURI NG THE ASSESSMENT PROCEEDINGS, WHEN THE IMPOUNDED MATERIAL HAD BEEN C ONFRONTED TO THE ASSESSEE; THAT THE ASSESSEE HAD FURNISHED INACCURAT E PARTICULARS OF ITS INCOME IN THE RETURN OF INCOME FILED; THAT THE SATISFACTIO N HAD BEEN RECORDED AT THE TIME OF COMPLETION OF ASSESSMENT PROCEEDINGS U/S 14 3(3) OF THE ACT; THAT THE ASSESSEE HAD SURRENDERED ADDITIONAL SUM OF ` 40,74,000/- ONLY WHEN IT WAS ASKED TO EXPLAIN THE SOURCE OF THE SHARE APPLICATIO N MONEY; AND THAT BY OFFERING THE AMOUNT FOR TAX, THE ASSESSEE HAD ADMIT TED THE CONCEALMENT OF INCOME TO THE EXTENT OF ` 40,74,000/-. IN THIS MANNER, THE AO IMPOSED PENALTY OF ` 14,61,600/- ON THE ASSESSEE COMPANY U/S 271(1)(C) O F THE I.T. ACT. ITA 1896(DEL)2010 10 12. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE PENALTY IMPOSED, OBSERVING, INTER ALIA, THAT THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE CLEARLY ESTABLISHED THAT THE OFFER OF SURRENDER FOLLOWED INVESTIGATION MADE BY THE AO REGARDING SHARE APPLIC ATION MONEY RECEIVED BY THE ASSESSEE; THAT NO CASE HAD BEEN MADE OUT THA T THE INCOME HAD BEEN OFFERED FOR TAX BY THE ASSESSEE OF ITS OWN VOLITION /INVESTIGATION BY THE DEPARTMENT; AND THAT ALSO, THE PENALTY PROCEEDINGS HAD BEEN DULY INITIATED BY THE AO IN THE ASSESSMENT ORDER. 13. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ARGUED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY WRONGLY LEVIED; THAT THE LD. CIT(A) HAS ERRED IN IGNORING THE ASSESSEES CONTENT ION THAT NO PENALTY WAS LEVIABLE AS THE ASSESSEE HAD SUO MOTU SURRENDER6ED THE INCOME AND THAT AS SUCH, THERE WAS NEITHER ANY CONCEALMENT OF INCOME, NOR ANY FURNISHING OF INACCURATE PARTICULARS THEREOF BY THE ASSESSEE; THA T THE LD. CIT(A) HAS FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE ADDITI ONS HAD BEEN MADE ONLY ON THE BASIS OF SURRENDER MADE BY THE ASSESSEE, WITHOU T ANY REFERENCE TO ANY DOCUMENTARY EVIDENCE; THAT THE LD. CIT(A) HAS FURTH ER FAILED TO CONSIDER THE ASSESSEES CONTENTION THAT NO FINDING HAVING BEEN R ECORDED ON MERIT REGARDING CONCEALMENT IN THE PENALTY ORDER, THE LEV Y OF PENALTY IS UNSUSTAINABLE; THAT THE LD. CIT(A) HAS ALSO ERRED IN FAILING TO ACCEPT THE ITA 1896(DEL)2010 11 ASSESSEES CONTENTION THAT THE PENALTY ORDER IS UNT ENABLE IN LAW EVEN BECAUSE NO SATISFACTION HAS REQUIRED UNDER THE LAW HAS BEEN RECORDED BY THE AO IN THE ASSESSMENT ORDER; THAT THE LD. CIT(A) HAS ALSO WRONGLY IGNORED THE FACT THAT THE OBSERVATION IN THE PENALTY ORDER TO THE EF FECT THAT THE ASSESSEE HAD ITSELF ADMITTED THE CONCEALMENT OF INCOME TO THE EX TENT OF ` 40,74,000/- WAS FACTUALLY INCORRECT, INASMUCH AS, IN THE ASSESSMENT ORDER, THE AO HAD QUOTED THE ASSESSEES LETTER, WHEREIN IT HAD BEEN SPECIFI CALLY STATED THAT THE OFFER OF SURRENDER WAS WITHOUT ADMITTING ANY CONCEALMENT WHA TSOEVER OR ANY INTENTION TO CONCEAL AND THAT THE SURRENDER WAS BEI NG OFFERED WITH A VIEW TO AVOID LITIGATION AND TO BUY PEACE AND TO CHANNELISE ENERGY AND RESOURCE TOWARDS PRODUCTIVE WORK AND TO MAKE AMICABLE SETTLE MENT WITH THE INCOME TAX DEPARTMENT; THAT IT HAS ALSO ERRONEOUSLY NOT BE EN TAKEN INTO CONSIDERATION THAT THE AO DID NOT CARRY OUT ANY I NVESTIGATION, MUCH LESS BROUGHT ON RECORD ANY MATERIAL OR EVIDENCE PROVING CONCEALMENT ON THE PART OF THE ASSESSEE; AND THAT FURTHER THE LD. CIT(A) HA S ALSO REMAINED OBLIVIOUS OF THE FACT THAT UNDER EXACTLY SIMILAR FACTS AND CI RCUMSTANCES, NO PENALTY WAS IMPOSED IN THE CASE OF M/S. MARKETING SERVICES. ATTENTION HAS BEEN DRAWN TO THE ASSESSEES LETTER DATED 22.11.2006 CONTAININ G OFFER TO SURRENDER (PAGES 1 TO 3 OF ITS PAPER BOOK, APB FOR SHORT). RELIAN CE HAS BEEN PLACED ON THE FOLLOWING DECISIONS:- ITA 1896(DEL)2010 12 1. CIT V. BARODA TIN WORKS, 221 ITR 661(GUJ); 2. CIT V. SURESH CHANDRA MITTAL, 241 ITR 124(MP); AN D 3. CIT V. SURESH CHANDRA MITTAL, 251 ITR 9(SC). 14. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRON G RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT IT IS S QUARELY ESTABLISHED ON RECORD, HAS RIGHTLY NOTED BY THE LD. CIT(A), THAT T HE OFFER OF SURRENDER WAS MADE ONLY POST INVESTIGATION BY THE AO REGARDING T HE RECEIPT OF SHARE APPLICATION MONEY OF THE ASSESSEE; THAT THEREFORE, THE OFFER TO SURRENDER AGAIN AT ALL BE SAID TO HAVE BEEN MADE BY THE ASSESSEE VO LUNTARILY BEFORE INVESTIGATION INTO THE MATTER BY THE DEPARTMENT; TH AT THE PENALTY PROCEEDINGS WERE DULY INITIATED BY THE AO IN THE ASSESSMENT ORD ER, AS IS AMPLY CLEAR FROM A PERUSAL OF THE ASSESSMENT ORDER; THAT APROPOS THE CONTENTION THAT NO PENALTY WAS IMPOSED IN THE CASE OF MARKETING SERVICES, THE FACTS IN BOTH THE CASES ARE ENTIRELY DIFFERENT; THAT THEREIN INCOME WAS REV ISED VOLUNTARILY, AFTER THE SURVEY WAS CARRIED OUT, WHICH IS NOT THE CASE HEREI N; THAT ALSO, IN THIS CASE, THE OFFER OF SURRENDER HAD BEEN MADE ONLY AFTER THE MATERIAL WAS CONFRONTED TO THE ASSESSEE; AND THAT APROPOS THE REFERENCE TO THE MATERIAL AGAINST THE ASSESSEE (ASSESSMENT ORDER PAGE 3, PARA 12), IT IS A SUBSEQUENT DEVELOPMENT, WHEN IT ALREADY TAKEN POSSESSION OF THE SEIZED DOCU MENTS. 15. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THIS MATERIAL ON RECORD SHOWS THAT THE OFFER OF SUR RENDER WAS ONLY TO SETTLE ITA 1896(DEL)2010 13 THE DISPUTE AND THAT WHILE DOING SO, THE ASSESSEE D ID NOT ADMIT ANY CONCEALMENT INCOME. THIS IS EVIDENT FROM THE ASSE SSEES LETTER DATED 22.11.06 (APB 1 TO 3). THEREIN, IT HAS BEEN STATE D, INTER ALIA, AS FOLLOWS:- THE COMPANY WITH A VIEW TO AVOID LITIGATION AND BU Y PEACE AND TO CHANNELISE THE ENERGY AND RESOURCES TOWARDS PRODUCT IVE WORK AND TO MAKE AMICABLE SETTLEMENT WITH THE INCOME TAX DEPART MENT OFFERED TO SURRENDER A SUM OF ` 56,49,000/- AS INCOME FROM OTHER SOURCES. 16. THE SAID AMOUNT OF ` 56,49,000/- SUBSEQUENTLY GOT REDUCED TO ` 40,74,000/-, WHEN PEAK WAS WORKED OUT AT ` 219.5 LAKHS. 17. THE AFORESAID OFFER OF SURRENDER WAS ACCEPTED O NLY SUBSEQUENT TO IT HAVING BEEN EXAMINED ON A PETITION FILED U/S 144A O F THE ACT AND ON EXAMINING THE RECORDS OF THE CASE. IT IS PERTINE NT TO MENTION HERE, AS NOTED HEREIN ABOVE, THAT VIDE LETTER DATED 13.12.06, THE ACIT, CIRCULAR 32(1), NEW DELHI, I.E., THE AO OF M/S.MARKETING SERVICES, HAD STATED THAT HIS OFFICE DID NOT HAVE ANY STATEMENT RECORDED DURING THE COURSE O F SURVEY OPERATION; THAT NO OTHER COMMUNICATION REGARDING UTILIZATION OF THE OFFERED SUM WAS AVAILABLE; AND THAT FURTHER, HE DID NOT HAVE ANY DO CUMENT/RECORD/REFERENCE WHICH MAY BE USEFUL FOR THE PURPOSE OF FRAMING ASSE SSMENT IN RESPECT OF THE FIRM. 18. IN THE ORDER DATED 27.12.06, ISSUED DIRECTIONS U/S 144A OF THE ACT, THE ACIT OBSERVED, INTER ALIA, AS FOLLOWS:- ITA 1896(DEL)2010 14 ON THE BASIS OF ABOVE STATED FACTS AND CIRCUMSTANCE S OF THE CASE AND MOST PARTICULARLY IN VIEW OF THE FACT THAT NO ADVER SE INFERENCE IS POSSIBLE TO BE DRAWN AGAINST THE ASSESSEE COMPANY R EGARDING INDUCTION OF SHARE APPLICATION MONEY TO THE EXTENT OF ` 182.51 LACS, THE SOURCE OF SHARE APPLICATION MONEY TO THE EXTENT OF ` 182.51 LACS, THE SOURCE OF SHARE APPLICATION MONEY TO THE EXTENT MAY BE TREATED AS EXPLAINED. MOREOVER, THE SHARE APPLICATION MONEY T O THE EXTENT OF ` 182.51 LACS HAS ALREADY BEEN SUBJECTED TO TAX IN TH E HANDS OF M/S MARKETING SERVICES AND IT CAN NOT BE TAXED AGAIN IN THE HANDS OF THE RECIPIENT. THE AO IS, THEREFORE, REQUESTED TO ACCE PT THE ASSESSEES EXPLANATION REGARDING SOURCE OF SHARE APPLICATION M ONEY TO THE EXTENT OF ` 182.51 LACS. HOWEVER, IT MAY BE ENSURED AGAIN THA T THE SURRENDERED AMOUNT HAS NOWHERE BEEN INVESTED OR UTI LIZED EXCEPT AS STATED BY THE ASSESSEE. AS REGARD THE BALANCE AMOU NT OF SHARE APPLICATION MONEY TO THE EXTENT OF ` 56.49 LACS (REVISED TO ` . 40.24 LACS VIDE LETTER DATED 14.12.2006), THE ASSESSEE HAS ITS ELF TREATED THE BALANCE SHARE APPLICATION MONEY AS UNEXPLAINED AND VOLUNTARILY SHOWN ITS WILLINGNESS TO OFFER TO SURRENDER A FURTH ER SUM OF ` 56.49 LACS (REVISED TO ` . 40.24 LACS VIDE LETTER DATED 14.12.2006) FOR TAX. THE AO MAY ACCEPT THE ASSESSEES OFFER SUBJECT TO V ERIFICATIONS AS SUGGESTED ABOVE AND BRING THIS AMOUNT TO TAX. BEFO RE ACCEPTING THE REVISED OFFER, NECESSARY VERIFICATION MADE BY THE A O ABOUT ITS CORRECTNESS. HE SHOULD ALSO ENSURE THAT THE ASSESS EE HAS PAID THE TAXES ALONG WITH INTEREST ON THE ADDITIONAL SURREND ERED AMOUNT OF ` 56.49 LACS (REVISED TO ` 40.24 LACS VIDE LETTER DATED 14.12.2006). AS REGARDS GIVING DIRECTION TO THE AO THAT THIS ADDITI ONAL SURRENDERED AMOUNT SHOULD NOT BE TREATED AS CONCEALED INCOME AN D GIVING FURTHER DIRECTION TO THE AO REGARDING NON-INITIATION OF PEN ALTY PROSECUTION PROCEEDINGS. I DECLINE TO GIVE ANY DIRECTION TO TH E AO IN THIS REGARD AS THE ASSESSEE COMPANY ITSELF HAS TREATED THE BALA NCE AMOUNT OF SHARE APPLICATION MONEY AS ITS UNEXPLAINED MONEY AN D OFFERING IT FOR TAX. MOREOVER, NO SUCH DIRECTION IN MY OPINION FOR NON INITIATION OF PENALTY PROCEEDINGS CAN BE ISSUED TO THE AO AS BEFO RE INITIATING PENALTY PROCEEDINGS, HE HAS TO SATISFY HIMSELF AND COME TO A DEFINITE CONCLUSION THAT WHETHER THE ASSESSEE COMPANY HAS CO NCEALED THE ITA 1896(DEL)2010 15 PARTICULARS OF INCOME OR FILED INACCURATE PARTICULA RS OF INCOME. ALL THE POWERS REGARDING INITIATION OF PENALTY PROCEEDI NGS ARE VESTED IN THE AO AND I CANNOT STEP INTO THE SHOES OF AO. IN VIEW OF THESE FACTS, I DECLINE TO GIVE ANY DIRECTION IN RESPECT OF INITI ATION OF PENALTY PROCEEDINGS. AS REGARD INITIATION OF PROSECUTION P ROCEEDINGS, I AGAIN DECLINE TO GIVE ANY DIRECTION AS THE INITIATION OF PROSECUTION PROCEEDINGS ARE AT THE INSTANCE OF CHIEF COMMISSION ER/COMMISSIONER OF INCOME TAX. 19. IT WAS ONLY THERE-AFTER THAT THE OFFER HAD BEEN ACCEPTED BY THE AO AND THE ASSESSMENT HAD BEEN FINALIZED. 20. IT IS EVIDENT FROM THE ABOVE OBTAINING FACTS TH AT THERE WAS ENTIRELY NO MATERIAL ON RECORD AGAINST THE ASSESSEE TO SHOW ANY CONCEALMENT ON ITS PART. MOREOVER, THIS FACT WAS ALSO ADMITTED BY THE AO HIM SELF IN THE ASSESSMENT ORDER (PAGE 3, PARA 12 OF THE ASSESSMENT ORDER). SO MUCH SO THAT THERE IS NO INDICATION IN THE PENALTY ORDER AS TO THE CREDIT IN RESPECT OF WHICH THE PENALTY WAS BEING IMPOSED. THE ONLY MATERIAL FACT REMAI NING, THUS, WAS THAT THE ASSESSEE HAD OFFERED THE AMOUNT FOR TAXATION TO BUY PEACE AND THERE WAS NO MATERIAL ON RECORD IMPLICATING THE ASSESSEE FOR CON CEALMENT. 21. FURTHER, THE OBSERVATION, IN THE PENALTY ORDER, TO THE EFFECT THAT THE SURRENDER WAS MADE ONLY WHEN THE ASSESSEE WAS CONFR ONTED WITH THE DOCUMENTS FOUND IN THE SURVEY, DOES NOT ADVERSELY A FFECT THE CASE OF THE ASSESSEE AT ALL, THESE DOCUMENTS, BEING IN RESPECT OF SHARE CAPITAL WAYS. STILL FURTHER, THE OBSERVATION IN THE PENALTY ORDER TO TH E EFFECT THAT THE ASSESSEE HAD ITSELF ADMITTED THE CONCEALMENT OF INCOME TO TH E EXTENT OF ` 40,74,000/- , ITA 1896(DEL)2010 16 IS FOUND TO BE FACTUALLY INCORRECT. THE ASSESSEE S LETTER DATED 22.11.06 (SUPRA) CLEARLY MENTIONS THAT THE OFFER OF THE SUR RENDER IS WITHOUT ADMITTING ANY CONCEALMENT WHATSOEVER OR ANY INTENTION TO CONC EAL. IT AMPLY STANDS MADE OUT FROM THE FACTS ON RECORD THAT THE AMOUNT O F ` 40,74,000/- WAS SURRENDERED TO SETTLE THE DISPUTE WITH THE DEPARTME NT. IT DID NOT, IN ANY WAY, REPRESENT ANY CONCEALMENT ON THE PART OF THE ASSESS EE. OTHERWISE TOO, THE AO DID NOT CARRY OUT ANY INVESTIGATION, NOR WAS ANY MATERIAL BROUGHT ON RECORD TO PROVE CONCEALMENT ON THE ASSESSEES PART. THEN, NO PENALTY WAS IMPOSED ON M/S. MARKETING SECURITY, UNDER A SIMILAR SET OF CIRCUMSTANCES. 22. IN CIT V. BARODA TIN WORKS, 221 ITR 661(GUJ) (SUPRA), IT HAS BEEN HELD THAT THE FICTION CREATED U/S 68 OF THE I.T. AC T, BY ITSELF, CANNOT BE EXTENDED TO PENALTY PROCEEDINGS TO RAISE A PRESUMPT ION ABOUT CONCEALMENT OF SUCH INCOME. 23. IN CIT V. SURESH CHANDRA MITTAL, 241 ITR 124( MP)(SUPRA), IT HAS BEEN HELD AS FOLLOWS:- THOUGH IT IS TRUE THAT THE ASSESSEE HAD NOT SURREN DERED AT ALL AND THAT HE HAD DONE SO ON THE PERSISTENT QUERIES M ADE BY THE AO BUT ONCE THE REVISED ASSESSMENT WAS REGULARIZED BY THE REVENUE AND ONCE THE ASSESSING AUTHORITY HAD FAILED TO TAKE ANY OBJECTION IN THE MATTER THE DECLARATION OF INCO ME MADE BY THE ASSESSEE IN HIS REVISED RETURNS AND HIS EXPLANA TION THAT HE HAD DONE SO TO BUY PEACE WITH THE DEPARTMENT AND TO COME ITA 1896(DEL)2010 17 OUT OF VEXED LITIGATION COULD BE TREATED AS BONA FI DE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 24. CIT V. SURESH CHANDRA MITTAL, 241 ITR 124(MP) (SUPRA), HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN CIT V. SU RESH CHANDRA MITTAL, 251 ITR 9(SC)(SUPRA). 25. IN CHIKKAM SUBHARAO V. C.S. RAO, AIR 1971 SC 1 542, IT HAS BEEN HELD THAT BEFORE PENALTY CAN BE LEVIED, THE IMPLICA TION OF THE STATEMENT MADE MUST BE CLEAR AND CONCLUSIVE; AND THAT THERE SHOULD NOT BE ANY DOUBT OR AMBIGUITY ABOUT THE ALLEGED ADMISSION. 26. IN CIT V. MINING CO. 102 ITR 830(AP) AND IN SIR SHADILAL SUGAR & GENERAL MILLS LTD. V. CIT, 168 ITR 705(SC), IT H AS BEEN HELD TO THE EFFECT THAT THE MERE FACT THAT THE ASSESSEE HAS AGR EED TO HIGHER INCOME IS NOT A PROOF OF ADMISSION OF CONCEALMENT BY THE ASSESSEE . 27. FURTHER, IN THE FOLLOWING CASES, IT HAS BEEN HE LD THAT WHERE THE ASSESSEE, FOR ONE REASON OR THE OTHER AGREES OR SUR RENDERS CERTAIN AMOUNT FOR ASSESSMENT, THE IMPOSITION OF PENALTY SOLELY ON THE BASIS OF ASSESSEES SURRENDER IS NOT CALLED FOR:- 1. CIT V. M. GEORGE & BROS., 160 ITR 511(KER); 2. CIT V. NARANG & CO., 98 ITR 426(DEL); 3. KRISHAN LAL SHIV CHAND RAI V. CIT, 88 ITR 293(P& H). ITA 1896(DEL)2010 18 28. IN VIEW OF THE ABOVE, THE GRIEVANCE RAISED BY T HE ASSESSEE IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. THE ORDER U NDER APPEAL IS, THEREFORE, CANCELLED AND THE PENALTY IMPOSED IS DELETED. 29. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2011. SD/- SD/- (G.D. AGARWAL) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 18.11.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR
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