Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 91274 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 9 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-06-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
23-03-2015
Assessment Year
2007-2008
Appeal Filed On
29-08-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SH. G. C. GUPTA , VICE PRESIDENT AND SH. N. K. SAINI, AM ITA NO. 4994 /DEL/201 3 : ASSTT. YEAR : 2007 - 08 MOHD. IRSHAD 502, RAMPURI, ROORKEE ROAD, MUZAFFARNAGAR AND C/O SHRI N K ARORA, ADVOCATE, 219, CIVIL LINE SOUTH, MUZAFFARNAGAR VS INCOME TAX OFFICER, WARD - 2(1), MUZAFFARNAGAR (APPELLANT) (RESPONDENT) PAN NO. A IBPM6434B ASSESSEE BY : SMT. PREM LATA BANSAL, SR. ADV. & RAM AVTAR BANSAL, ADV. REVENUE BY : SH. P. DAM KANUNJN A , SR. DR DATE OF HEARING : 2 4 .0 3 .2015 DATE OF PRONOUNCEMENT : 22 .06 .2015 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 07.05.2013 OF LD. CIT(A), MUZAFFARNAGAR . 2 . F OLLOWING GR OUNDS HAVE BEEN RAISED IN THIS APPEAL : 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICER AND THEREBY CONFIRMING THE PENALTY IMPOSED BY HIM U/S 271(1)(C) OF THE ACT. 2. THAT THE OBSERVATION MADE BY THE CIT (A) THAT T HE ASSESSING OFFICER HAD RECORDED THE SATISFACTION FOR INITIATION OF PENALTY IN RESPECT OF ADDITION OF RS. 50 LACS IN THE BODY OF ASSESSMENT ORDER, IS INCORRECT ON ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 2 THE FACE OF RECORD AND THEREFORE, PENALTY LEVIED BY THE ASSESSING OFFICER IS LIABLE TO BE DE LETED. 3. THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ISSUE WAS FULLY COVERED BY SUB - CLAUSE (1B) OF EXPLANATION 7 TO SECTION 271(1)(C) OF THE ACT. IN FACT, THE ASSESSING OFFICER HAS NOT RECORDED SATISFACTION IN CLEAR TERMS AND THEREFORE, SECTION 27 1(1)(1B) IS NOT APPLICABLE TO THE PRESENT CASE. 4 . THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY DESPITE THE FACT THAT THE PROCEEDING INITIATED AND CONDUCTED BY THE ASSESSING OFFICER U/S 147/148 OF THE ACT, IN PURSUANCE TO WHICH THE PENALTY PROC EEDING WAS INITIATED, WAS NOT IN ACCORDANCE WITH LAW. 5. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY DESPITE THE FACT THAT THE SURRENDER OF RS. 50 LACS MADE BY THE ASSESSEE WAS BONAFIDE. 6 . THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENA LTY IGNORING THE MATERIAL FACT THAT THE ASSESSING OFFICER HAD ACCEPTED THE SURRENDER; IT IS A WELL ESTABLISHED PRINCIPLE THAT THE SURRENDER MADE BY THE ASSESSEE IS EITHER TO BE ACCEPTED IN TOTO OR WAS TO BE REJECTED IN TOTO. 7. THAT THE LD. CIT(A) HAS ERR ED IN OBSERVING THAT THE ASSESSEE HAD CONCEALED THE INCOME. IN FACT THE ASSESSEE HAD DISCLOSED THE AMOUNT OF RS. 50 LACS IN HIS BOOKS OF ACCOUNTS AND THAT THE COPY OF BANK ACCOUNT ISSUED BY CANARA BANK WAS ALREADY BEFORE THE ASSESSING OFFICER AT THE TIME O F ORIGINAL ASSESSMENT PROCEEDING. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 3 8. THAT THE LD. CIT(A) HAS ERRED IN OBSERVING THAT THE ASSESSEE HAD NOT EXPLAINED THE SOURCE FROM WHERE THE AMOUNT OF RS. 50 LACS WAS RECEIVED. IN FACT, THE ASSESSEE HAD EXPLAINED THE SOURCE SINCE HE WAS NOT ABLE TO PRODUC E THE PARTY, HE HAD SURRENDERED THE AMOUNT WHICH WAS VOLUNTARY AND BONAFIDE. HENCE NO PENALTY COULD HAVE BEEN IMPOSED BY THE ASSESSING OFFICER. 9. THAT THE OBSERVATION OF CIT(A) IS VAGUE WHEN HE HELD THAT THE ASSESSEE HAD FAILED TO ADDUCE ANY SATISFACTORY EXPLANATION IN REBUTTAL OF THE PRESUMPTION THAT THE AMOUNT OF RS. 50 LACS REPRESENTED HIS UNEXPLAINED MONEY. IN FACT, THE ASSESSEE HIMSELF HAD SURRENDERED THE AMOUNT OFFERING THE SAME AS UNEXPLAINED MONEY. 10. THAT THE LD. CIT(A) HAS MISDIRECTED HIMSELF IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD ADDUCED THE EXPLANATION IN RESPECT OF RS. 50 LACS, THERE WAS A DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER AND THEREFORE, ASSESSEE SURRENDERED THE AMOUNT OF RS. 50 LACS LOOKING TO HIS OLD AGE, SURRENDER HAD BEEN ACCEPTED BY THE ASSESSING OFFICER AND THEREFORE, NO PENALTY COULD HAVE BEEN LEVIED BY HIM AND CONFIRMED BY CIT(A). 11. THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER WAS UNWARRANTED ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT(A) HAS ARBITRARILY CONFIRMED THE SAME AND THEREFORE, IT WAS LIABLE TO BE DELETED. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 4 12. THAT THE APPELLANT SEEKS LEAVE TO ADD, AMEND, ALTER ABANDON OR SUBSTITUTE ANY OF THE ABOVE GROUNDS DURING THE HEARING OF THE APPEAL. 3. FROM THE ABOVE GRO UNDS, IT IS GATHERED THAT ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE CONFIRMATION OF PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE FILED THE RETURN OF INCOME ON 14.03.2008 DECLARING AN INCOME OF RS. 2,76,8 9 0/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AT AN INCOME OF RS. 2,83,890/ - . LATER ON, IT CAME TO THE KNOWLEDGE OF THE AO THA T THE ASSESSEE HAD FURNISHED FABRICATED BANK STATEMENT DUE TO WHICH THERE WAS A N ESCAPED INCOME OF RS. 57,95,000/ - . SUBSEQUENTLY, THE NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE AND THE REASSESSMENT WAS COMPLETED U/S 147 OF THE ACT AT AN INCOME OF RS. 57,55,218/ - BY MAKING THE FOLLOWING ADDITIONS: 1. ON ACCOUNT OF UNDISCLOSED BUSINESS INCOME 50,00,000/ - 2. ON ACCOUNT OF UNEXPLAINED EXPENDITURE 7,13,535/ - TOTAL 57,13,535/ - 5. THE AO INITIATED THE PROCEEDINGS U/S 271( 1)(C) OF THE ACT. IN THE MEANTIME, A RECTIFICATION ORDER U/S 154 OF THE ACT WAS PASSED AND INCOME OF THE ASSESSEE WAS RECOMPUTED AT RS. 59,97,425/ - SINCE THE RETURNED INCOME IN THE ASSESSMENT ORDER DATED 29.12.2010 U/S 143(3) OF ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 5 THE ACT HAD BEEN ERRONEOUSL Y TAKEN AS RS. 41,683/ - INSTEAD OF RS. 2,84,890/ - . AGAINST THE SAID ORDER, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 29.11.2011, DELETED THE ADDITION OF RS. 7,13,535/ - MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE BUT UPHELD THE ADDITION OF RS. 50,00,000/ - MADE ON ACCOUNT OF UNDISCLOSED BUSINESS INCOME. THE AO AFTER RECEIVI NG THE ORDER OF THE LD. CIT(A) OF ISSUED A NOTICE U/S 271(1)(C) OF THE ACT AND THE ASSESSEE FURNISHED A WRITTEN REPLY STATING THEREIN AS UNDER: (I) THE AS SESSEE BEING ILLITERATE PERSON, IN ORDER TO AVOID ANY DISPUTE AND TO PURCHASE PEACE OF MIND AND TO AVOID LITIGATIONS, SURRENDERED THE AMOUNT OF RS. 50,00,000/ - FOR TAXATION SUBJECT TO NO PENAL ACTION, AS THERE IS NO CONCEALMENT OF ANY INCOME. THE ASSESSEE HAS MADE THIS OFFER TO TAX RS. 50,00,000/ - WITH CLEAN HANDS AND HIS DISCLOSURE IS TRUE TO AVOID ANY DISPUTE IN FUTURE, AS HE IS NOT CONVERSANT WITH THE LAWS BEING ILLITERATE. HE HAS ENCLOSED A CHEQUE NO. 123584 DATED 15.11.2010 FOR RS. 10,00,000/ - DRAWN IN FAVOUR OF THE INCOME TAX OFFICER, MUZAFFARNAGAR TOWARDS INCOME TAX PAYABLE ON RS. 50.00 LAC AND TO ACCEPT THE OFFER. (II) THAT THE CONDITIONAL SURRENDER OF RS. 50,00,000/ - WAS ACCEPTED BY ACCEPTING THE ADVANCE TAX PAYMENT ON THIS AMOUNT BY DEPOSIT OF SU BMITTED CHEQUE IN THE GOVERNMENT ACCOUNT. THEREAFTER, THE PROCEEDING OF RE - ASSESSMENT STARTED AND CONCLUDED VIDE ASSESSMENT ORDER DATED 29.12.2010. IT WAS ALSO AGREED AT THE POINT OF SURRENDER THAT THE TAX PAYABLE ON THIS AMOUNT WILL ALSO BE PAID AT STIPUL ATED TIME ON RECEIPT OF ASSESSMENT ORDER. SO THE ACTION ON THE PART OF THE ASSESSEE PROVES THAT HE HAS FULFILLED THE CONDITIONS OF SURRENDER AND THERE IS NO OUTSTANDING OF ANY TAX LIABILITY AGAINST HIM. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 6 6 . THE AO DID NOT ACCEPT THE CONDITIONAL SURRENDER O F RS. 50,00,000/ - SUBJECT TO NO PENAL ACTION. HE WAS OF THE VIEW THAT THE PENALTY CAN BE LEVIED ON AGREED ADDITIONS AND OBSERVED THAT THE LETTER OF ASSESSEE SAYING PENALTY MAY NOT BE LEVIED WAS NOT AN UNDERSTANDING THAT THE PENALTY WOULD NOT BE LEVIED. T HE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: POLO SINGH & CO. VS CIT (DEL) 98 ITR 564 CIT VS KRISHNA & CO. (MAD) 120 ITR 144 CIT VS DR. R. C. GUPTA & CO. (RAJ.) 122 ITR 567 MIRZAPUR CONSTRUCTION CO. VS CIT (ALL) 122 ITR 828 UNION ENGINEERING CO. VS CIT (KER) 122 ITR 719 ITO VS LEELA MAMMEN (ITAT, COCHIN) 63 TTJ 252 JASWANT RAI & ANOTHER VS CBDT & ORS. (DEL) 133 ITR 19 CIT VS GATES FOAM & RUBBER CO. (KER) 91 ITR 464 CIT VS P. B. SHAH & CO. (PVT.) LTD. (CAL) 113 ITR 587 RATHNAM & CO. VS IAC (MAD) 124 I TR 587 ACIT VS S. M. KANNAPPA AUTHOMOBILES (P) LTD. (ITAT, BANG) 72 ITD 474 7 . THE AO HELD THAT THE ASSESSEE CONCEALED THE INCOME BY PRODUCING/FURNISHING THE FABRICATED COPIES OF ACCOUNT AND WHEN NO OPTION WAS LEF T EXCEPT TO MAKE THE SURRENDER, THE ASSESS EE SURRENDERED THE INCOME OF RS. 50,00,000/ - AND PAID THE TAX AT RS. 10,00,000/ - ON IT. ACCORDINGLY, THE PENALTY OF RS. 16,88,730/ - U/S 271(1)(C) OF THE ACT WAS LEVIED BY THE AO . 8 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND FUR NISHED THE WRITTEN SUBMISSION S WHICH ARE INCORPORATED IN PARA 4 OF THE IMPUGNED ORDER AND REPRODUCED VERBATIM AS UNDER: ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 7 THE BASIC ISSUE INVOLVED IN THE PRESENT APPEAL IS, WHETHER THE ASSESSING OFFICER WAS CORRECT IN LAW AND ON FACTS IN IMPOSING THE PENALT Y OF RS. 17 LAC U/S 271(1)(C) OF THE ACT AND WHETHER THE ASSESSING OFFICER IS CORRECT IN LAW IN IMPOSING THE PENALTY IN PURSUANCE TO THE INVALID AND ILLEGAL RE - ASSESSMENT PROCEEDING. FACTS A) THE APPELLANT CARRYING ON THE BUSINESS FROM ITS PROPRIETARY C ONCERN M/S MACRO INDUSTRIES, RAMPURI, MUZAFFARNAGAR. B) RETURN U/S 139(1) WAS FILED BY THE ASSESSEE ON 31.07.2007 DECLARING AN INCOME OF RS. 2,76,890/ - . C) CASE WAS SELECTED FOR SCRUTINY, NOTICE U/S 143(2) AND 142(1) WERE ISSUED IN RESPONSE TO WHICH, A SSESSEE APPEARED THROUGH COUNSEL AND FILED REQUIRED DETAILS TIME TO TIME. D) ON 21.12.2009, THE BOOKS OF ACCOUNTS ALONGWITH BILLS AND VOUCHERS WERE PRODUCED BY THE ASSESSEE, WHICH WERE EXAMINED BY THE ASSESSING OFFICER AND THE CASE WAS DISCUSSED BY HIM. E) THEREAFTER, THE ASSESSEE WAS TELEPHONICALLY INFORMED THAT THERE IS CERTAIN DISCREPANCY IN THE PAGE NUMBER OF CASH BOOK MENTIONED IN THE SALES TAX ASSESSMENT ORDER AND THE COMPUTERIZED CASH BOOK PRODUCED BEFORE HIM. ACCORDINGLY, HE AGAIN REQUIRED THE A SSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS ON 30.12.2009. F) ON 30. 12.2009, THE ASSESSEE AGAIN PRODUCED THE BOOKS OF ACCOUNTS, WHICH WERE RE - EXAMINED BY THE ASSESSING OFFICER. HE EXPLAINED THE ALLEGED DISCREPANCY IN CASH BOOK PAGE NO STATED IN SALES TAX O RDER AND THE CASH BOOK PRODUCED BEFORE HIM. IN FACT, THERE WAS NO DISCREPANCY. IN SALES TAX ORDER, THE NUMBER ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 8 MENTIONED WAS OF MANUAL CASH BOOK WHEREAS THE CASH BOOK PRODUCED BEFORE HIM WAS COMPUTERIZED VERSION OF MANUAL CASH BOOK. AFTER DULY SATISFYING HI MSELF AND AFTER DUE VERIFICATION/EXAMINATION OF THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER PROPOSED TO MAKE AN ADDITION OF RS. 7,000/ - ON ACCOUNT OF UNACCOUNTED EXPENDITURE SUBJECT TO NO PENAL ACTION. THE TRUE COPY OF THE ORDER SHEET SHOWING THE PROCEE DING CONDUCTED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT IS ENCLOSED HEREWITH AS ANNEXURE - A . G) THE ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER AT AN INCOME OF RS. 2, 83, 890/ - . H) THAT, THEREAFTER, A NOTICE U/S 148 WAS ISSUED BY THE ASSESSIN G OFFICER ON 11.03.2010 REQUIRING THE ASSESSEE TO FILE A RETURN WITHIN 30 DAYS FROM THE DATE OF SERVICE OF THE SAID NOTICE. THE TRUE COPY OF THE SAID NOTICE IS ENCLOSED HEREWITH AS ANNEXURE - B'. I) VIDE LETTER - DATED 09.06.2010, ASSESSEE SUBMITTED THAT THE RETURN ORIGINALLY FILED BE TREATED AS RETURN FILED IN PURSUANCE TO THIS NOTICE. THE TRUE COPY OF THIS LETTER IS ENCLOSED HEREWITH AS ANNEXURE - C . J) NOTICE U/S 143(2) WAS ISSUED BY THE ASSESSING OFFICER ON 09.07.2010. THE TRUE COPY OF LETTER ALO NGWITH NOTICE U/S 143(2) IS ENCLOSED HEREWITH AS ANNEXURE - D . ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 9 K) VIDE LETTER - DATED 16.07.2010, ASSESSEE REQUESTED THE ASSESSING OFFICER TO COMMUNICATE THE REASONS IN WRITING FOR INVOKING PROVISIONS OF SECTION 147 R/W SECTION 148 OF THE ACT. THE TRUE C OPY OF THIS LETTER IS ENCLOSED HEREWITH AS ANNEXURE - E . L) ON THE SAME DATE, THE ASSESSING OFFICER PROVIDED THE REASONS TO THE ASSESSEE, THE COPY OF WHICH IS ENCLOSED HEREWITH AS ANNEXURE - E . M) IN THE REASONS THE ASSESSING OFFICER HAD RECORDED THAT HE HAD CALLED FOR THE BANK ACCOUNT OF ASSESSEE FROM CANARA BANK U/S 133(6) & THE SAME WAS STATED TO BE RECEIVED AFTER 30.12.2009 I.E. AFTER PASSING THE ASSESSMENT ORDER. HE FOUND CERTAIN ANOMALIES IN THE COPY OF ACCOUNT DIRECTLY FURNISHED BY THE BANK AND COP Y OF ACCOUNT FURNISHED BY THE ASSESSEE, AS A RESULT OF WHICH THE INCOME TO THE EXTENT OF RS. 57,95,000/ - HAD ESCAPED THE ASSESSMENT FOR THE AY 2007 - 08 AND ACCORDINGLY, HE HAD ISSUED NOTICE U/S 148. N) ASSESSEE ISSUED A LETTER TO CANARA BANK ON 17.07.2010 SEEKING INFORMATION AS TO WHEN THE DEPARTMENT SOUGHT ACCOUNT STATEMENT OF ASSESSEE AND WHEN THEY SUPPLIED THE SAME. O) VIDE LETTER DATED 17.07.2010 ITSELF, CANARA BANK INFORMED THAT THEY HAD SUPPLIED THE COPY OF BANK STATEMENT OF THE ASSESSEE TO THE DEP ARTMENT ON 24.12.2009 BY HAND TO THE OFFICIAL IN PURSUANCE TO THEIR LETTER - DATED 24.12.2009. THE TRUE COPY OF THE LETTER - DATED 17.07.2010 ISSUED BY THE CANARA BANK IS ENCLOSED HEREWITH AS ANNEXURE - G . P) THEREAFTER, ASSESSEE SOUGHT INSPECTION OF ASSESSM ENT ON 06.08.2010 WHICH WAS ALLOWED TO HIM. VIDE LETTER - DATED ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 10 25.08.2010, ASSESSEE REQUESTED FOR CERTIFIED COPIES OF CERTAIN DOCUMENTS WHICH WERE PROVIDED TO HIM ON 31.08.2010. THE TRUE COPY OF THE LETTER - DATED 25.08.2010 ISSUED BY THE ASSESSEE AND THE COPY OF LETTER - DATED 31.08.2010 ALONGWITH DOCUMENTS PROVIDED BY THE ASSESSING OFFICER ARE ENCLOSED HEREWITH AS ANNEXURE - H AND I . Q) ON GOING THROUGH THESE DOCUMENTS, IT CAME TO KNOW THAT THE ASSESSING OFFICER HAD CALLED FOR INFORMATION FROM TRADE TAX DEPARTMENT VIDE LETTER - DATED 18.12.2009 AND FROM CANARA BANK VIDE LETTER - DATED 24.12.2009, WHICH WAS RECEIVED BY THEM ON 18.12.2009 & 26.12.2009 RESPECTIVELY. HOWEVER, ENTRIES WITH RESPECT TO SENDING OF THESE LETTERS AND RECEIVING INFORMATION WERE NOT MAD E BY THE ASSESSING OFFICER IN THE ORDER SHEET. IT MAY BE PRESUMED THAT THE TRADE TAX DEPARTMENT MIGHT HAVE SENT THE SALES TAX ASSESSMENT ORDER AFTER 21.12.2009 BUT BEFORE 30.12.2009 AS THE ASSESSING OFFICER HAD MADE A SPECIFIC QUERY WITH RESPECT, TO DISC REPANCY IN THE PAGE NO. OF CASH BOOK AND HAD REQUIRED THE ASSESSEE TO AGAIN PRODUCE THE BOOKS OF ACCOUNTS ON 30.12.2009. R) THAT, THEREAFTER, VIDE LETTER - DATED 21.09.2010, ASSESSEE FILED OBJECTIONS TO THE PROCEEDINGS INITIATED BY THE ASSESSING OFFICER U/ S 148 OF THE ACT AND REQUESTED HIM TO DROP THE PROCEEDINGS AS THE SAME WAS BASED ON MERE CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW. THE TRUE COPY OF THE OBJECTIONS DATED 21.09.2010 FILED BY THE ASSESSEE ARE ENCLOSED HEREWITH AS ANNEXURE - 'J' . S) THAT THE OBJECTIONS WERE NOT DISPOSED OFF BY THE ASSESSING OFFICER TILL THE CONSIDERABLE TIME IS LAPSED. HE CONTINUED WITH THE REASSESSMENT PROCEEDING, MATTER WAS DISCUSSED AT VARIOUS ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 11 STAGES, EVEN BEFORE ADDITIONAL CIT, MUZAFFARNAGAR AND IT WAS PERSUADED T O SURRENDER THE AMOUNT OF RS.50 LAC TO AVOID LITIGATION. T) THAT IN THE MEANTIME, THE ASSESSEE DISCUSSED THE MATTER WITH VARIOUS LEGAL CONSULTANTS WHO ADVISED TO GO IN LITIGATION AS THE VERY BASIS TO INITIATE THE PROCEEDING U/S 148 WAS BAD - IN - LAW AS NO NEW INFORMATION HAD COME BEFORE THE ASSESSING OFFICER TO FORM A BELIEF BASED ON REASONS. THE INFORMATION, ON THE BASIS OF WHICH THE PROCEEDING WAS INITIATED, WAS ALREADY BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDING AND THE SAME WA S DULY CONSIDERED BY THE ASSESSING OFFICER. U) THAT, HOWEVER, THE ASSESSEE BEING ILLITERATE PERSON, SURRENDERED THE AMOUNT OF RS.50 LAC SUBJECT TO NO PENAL ACTION, TO AVOID ANY DISPUTE AND LITIGATIONS AND ALSO TO PURCHASE PEACE OF MIND. WITHDRAWING OF OB JECTION WAS ALSO AS A MATTER OF CONDITION. TO SHOW THE BONAFIDE, ASSESSEE ALSO HANDED OVER THE CHEQUE FOR RS.10 LAC TOWARDS TAX LIABILITY WITH A REQUEST TO ACCEPT THE SURRENDER OF RS.50 LAC, THE BALANCE AMOUNT OF TAX WAS REQUESTED TO BE PAID ON FRAMING THE ASSESSMENT, FROM THE FAMILY FUND AND THE INTEREST WAS REQUESTED TO BE WAIVED. THE TRUE COPY OF THE LETTER - DATED 15.11.2010 ISSUED BY THE ASSESSEE MAKING CONDITIONAL SURRENDER OF RS.50 LAC IS ENCLOSED HEREWITH AS ANNEXURE - 'K' . T) THAT THE ASSESSEE MADE SURRENDER DESPITE THE FACT THAT THE AMOUNT WAS EXPLAINABLE. DURING THE STATEMENT ON 14.12.2010 AS WELL AS IN THE LETTER - DATED 15.11.2010, ASSESSEE HAS EXPLAINED THAT THE AMOUNT OF RS.50 LAC WAS NOT THE INCOME OF M/S MACRO INDUSTRIES BUT THE SAME WAS SAVIN GS OF HIS FAMILY KEPT FOR UNFORESEEN EVENTS AND WAS DEPOSITED IN THE BANK ACCOUNT FOR PREPARATION OF DD TO BE ISSUED TO M/S DHAR CEMENTS LIMITED FOR PURCHASE OF PLANT & MACHINERY IN AN ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 12 AUCTION CARRIED ON BY THE OFFICIAL LIQUIDATOR INDORE. SINCE THE SAID DD WAS CANCELLED ON 16.05.2006 DUE TO FAILURE OF BID IN THE AUCTION, THE AMOUNT WAS WITHDRAWN BY WAY OF SIX CHEQUES, FIVE FOR AN AMOUNT OF RS.9 LAC EACH AND THE SIXTH CHEQUE FOR AN AMOUNT OF RS.5 LAC. THE SAID AMOUNT WAS ALSO CREDITED AND DEBITED TO THE ASSE SSEE'S PERSONAL FUND ACCOUNT WHICH WAS DULY EXISTING IN THE LEDGER PRODUCED BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDING. ASSESSEE HAD ALSO EXPLAINED THAT A SUM OF RS.10 LAC (OUT OF RS.50 LAC) WAS RECEIVED BY HIM FROM HIS FATHER BEFORE 40 YEARS DURING FAMILY ARRANGEMENT AND RS.15 LAC AND RS.25 LAC (TOTALING TO RS.40 LAC) WAS RECEIVED BY THE ASSESSEE AS ADVANCE AGAINST THE PROPERTIES AT CHARTHAWAL AND MUZAFFARNAGAR BELONGING TO HIS FAMILY. HOWEVER, THE ASSESSING OFFICER CONTINUED TO CONDUCT THE PROCEEDING, IN COMPLIANCE TO WHICH ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS INCLUDING LEDGER, CASH BOOK AND JOURNAL. STATEMENT OF THE ASSESSEE WAS ALSO RECORDED ON OATH. IN THE STATEMENT, THE ASSESSEE REITERATED THE SAME AVERMENTS AS MADE IN HIS LETTER - DATED 15.11.2010. THE TRUE COPY OF THE STATEMENT OF THE ASSESSEE RECORDED BY THE ASSESSING OFFICER ON 14.12.2010 IS ENCLOSED HEREWITH AS ANNEXURE - L . U) THAT AGAIN IN COMPLIANCE TO THE PROCEEDING, THE ASSESSEE FURNISHED THE LETTER - DATED 22 .12.2010 FURNISHING THE DETAILS REQUIRED BY THE ASSESSING OFFICER AND THE CASE WAS DISCUSSED BY HIM. THE TRUE COPY OF LETTER - DATED 22.12.2010 IS ENCLOSED HEREWITH AS ANNEXURE - 'M' . V) THEREAFTER, THE ASSESSING OFFICER PASSED THE ORDER - DATED 29.12.2010, WH EREBY HE DISBELIEVED THE SURRENDER MADE BY THE ASSESSEE, REJECTED THE BOOKS OF ACCOUNTS INVOKING THE PROVISIONS ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 13 OF SECTION 145(3) OF THE ACT AND ADDED A SUM OF RS.50 LAC AS UNDISCLOSED INCOME FROM THE BUSINESS, ALONGWITH ADDITION OF RS.7,13,535/ - ON ACCOUN T OF UNEXPLAINED EXPENDITURE. HE ALSO INITIATED THE PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT SEPARATELY. THE TRUE COPY OF THE ORDER - DATED 29.12.2010 PASSED B Y THE ASSESSING OFFICER U/S 147/ 143(3) IS ENCLOSED HEREWITH AS ANNEXURE - 'N' . W) AGAINST THIS ORDER, ASSESSEE FILED AN APPEAL BEFORE CIT(A) WHO UPHELD THE PROCEEDING INITIATED BY THE ASSESSING OFFICER U/S 147/148 OF THE ACT AND ALSO CONFIRMED THE ADDITION OF RS.50 LAC MADE BY HIM. CIT(A) OBSERVED THAT THE BANK STATEMENT OF THE ASSESSEE FROM THE CAN ARA BANK WAS BEFORE THE ASSESSING OFFICER, BEFORE THE COMPLETION OF ASSESSMENT PROCEEDING ON 30. 12.2009, HOWEVER, DUE TO REMISSNESS, ON THE PART OF THE ASSESSING OFFICER, THE INFORMATION OBTAINED FROM THE BANK ON 24.12.2009 COULD NOT BE TAKEN COGNIZANCE. REGARDING SURRENDER OF RS.50 LAC, CIT(A) OBSERVED THAT SINCE THE ASSESSEE HAD SURRENDERED THE SAME, IT COULD NOT HAVE BEEN APPEALED AGAINST. HOWEVER, CIT(A) GRANTED RELIEF TO THE ASSESSEE BY DELETING THE ADDITION OF RS.7,13,535/ - MADE BY THE ASSESSING OFFI CER DUE TO ALLEGED DIFFERENCE IN ACCOUNTS. THE TRUE COPY OF THE ORDER PASSED BY CIT(A) IS ENCLOSED HEREWITH AS ANNEXURE - 'O' . X) THAT DESPITE THE CONDITIONAL SURRENDER, THE ASSESSING OFFICER ISSUED A SHOW - CAUSE NOTICE TO THE ASSESSEE AS TO WHY PENALTY U/ S 271(1)(C) OF THE ACT BE NOT LEVIED. ASSESSEE FILED A DETAILED REPLY DATED 10.05.2012 AND EXPLAINED THAT HE HAD FULFILLED ALL THE CONDITIONS UNDER SURRENDER 'AND PAID THE FULL TAX. THEREFORE, NO PENALTY COULD BE LEVIED. HE ALSO RELIED UPON CERTAIN CASE LA W AND SUBMITTED THAT THE PROVISIONS OF EVIDENCE ACT ARE NOT ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 14 STRICTLY APPLICABLE TO THE INCOME TAX PROCEEDING AS THE SAME ARE NOT THE CRIMINAL PROCEEDING. ACCORDINGLY, HE REQUESTED TO DROP THE PENALTY PROCEEDING. THE TRUE COPY OF THE REPLY - DATED 10.05.201 2 IS ENCLOSED HEREWITH AS ANNEXURE - P . Y) HOWEVER, THE ASSESSING OFFICER DID NOT CONVINCE WITH THE SAME AND IMPOSED THE PENALTY OF RS.17 LAC U/S 271(1)(C) OF THE ACT. THE TRUE COPY OF THE ORDER IS ALREADY ENCLOSED TO THE APPEAL ALONGWITH FORM NO. 35. Z) THE ASSESSING OFFICER HAS IMPOSED THE PENALTY ON THE FOLLOWING GROUNDS: I) THERE IS NO PROMISSORY ESTOPPEL AGAINST STATUTE. NO CONDITION CAN BE ATTACHED WITH AGREED ADDITION FOR SURRENDER. DURING THE REASSESSMENT PROCEEDINGS, ANOMALIES WERE FOUND OUT ON COMPARING THE BANK STATEMENT SUPPLIED BY THE CANARA BANK AFTER PASSING ORDER U/S 143(3) DATED 30.12.2009 AND COPY OF STATEMENT FURNISHED BY THE ASSESSEE. II) THE ASSESSEE HAS NEITHER SURRENDERED THE AMOUNT SUO MOTO IN THE ORIGINAL ASSESSMENT PROCEED ING NOR IN COMPLIANCE TO NOTICE U/S 148. IT WAS ONLY WHEN ASSESSEE WAS NOT LEFT EXCEPT SURRENDER OF ALLEGED CONCEALED AMOUNT, HE SURRENDERED THE AMOUNT OF RS.50 LAC. III) PENALTY PROCEEDING WAS INITIATED ONLY AFTER DRAWING INFERENCE OF CONCEALMENT OF IN COME AND FURNISHING INACCURATE PARTICULARS BY THE ASSESSEE. THE ASSESSING OFFICER RELIED UPON THE PROVISIONS OF SECTION 271(1B) OF THE INCOME TAX ACT. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 15 IV) ASSESSEE COULD NOT DISCHARGE HIS ONUS FOR EXPLAINING SOURCE OF RS.50 LAC DURING REASSESSMENT PROCEE DING. ASSESSEE HAD PRODUCED FABRICATED ACCOUNT, MOHD. IRSHAD PERSONAL FUND A/C WAS NOT FOUND IN THE BOOKS OF ACCOUNTS FOR IMMEDIATELY PRECEDING AND SUCCEEDING YEARS. V) EXPLANATION 1(B) IS APPLICABLE TO THE PRESENT CASE. VI) ASSESSEE HAD CONCEALED AND FURNISHED INACCURATE PARTICULARS OF INCOME. CONTENTIONS 01) AS PER PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THE ASSESSING OFFICER HAS TO SATISFY HIMSELF DURING THE ASSESSMENT PROCEEDING ITSELF THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR HAS FURNISHED THE INACCURATE PARTICULARS OF INCOME. NO SUCH SATISFACTION HAS BEEN ARRIVED AT BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING. SATISFACTION ARRIVED AT DURING THE PENALTY PROCEEDING CANNOT BE SUBSTITUTED FOR THE SATISFACTION TO BE ARRIVED AT DURING THE ASSESSMENT PROCEEDING. 02) THE LEVY OF PENALTY IS NOT AN AUTOMATIC CONCOMITANT OF THE ASSESSMENT. THERE IS NO IDENTITY' BETWEEN ASSESSMENT PROCEEDING AND PENALTY PROCEEDING. IN JAIN BROS. VS UNION OF INDIA (77 ITR 107) SUPREME COURT HAVE HELD THAT THOUGH PENALTY HAS BEEN REGARDED AS AN ADDITIONAL TAX IN A CERTAIN SENSE AND FOR CERTAIN PURPOSES, IT IS NOT POSSIBLE TO HOLD THAT PENALTY PROCEEDING ARE ESSENTIALLY A CONTINUATION OF ASSESSMENT PROCEEDING. HENCE, ASSESSING OFFICER HAS TO FORM HIS OPINION AND RECORD HIS SATISFACTION BEFORE CONCLUSION OF ASSESSMENT PROCEEDING. A FINDING MUST BE RECORDED THAT ASSESSEE HAS BEEN GUILTY OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 16 03) THE ASSESSING OFFICER HAS NOT ARRIVED AT A REQUISITE SATISFACTION DURING THE ASSESSMENT PROCEEDING WHEN HE HAS MERELY INITIATED THE PENALTY PROCEEDING SEPARATELY WITHOUT OBSERVING AS TO WHETHER IT WAS A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. VARIOUS HI GH COURTS HAVE OBSERVED THAT TO ARRIVE AT A SATISFACTION AS TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IS A PREREQUISITE FOR INITIATING PENALTY PROCEEDING. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS RAM COMMERCIAL ENTERP RISES (246 ITR 568) , AFTER RELYING ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF D M MANASVI (86 ITR 557) AND S V ANGIDI CHETTIAR (44 ITR 739) HAD REPELLED THE ARGUMENT OF THE REVENUE THAT ALL THE FACTS AVAILABLE ON RECORD COUPLED WITH THE DIRECTION BY A SSESSING OFFICER TO INITIATE THE PROCEEDING U/S 271(1)(C) OF THE ACT IN THE ASSESSMENT ORDER ITSELF LEADS TO AN INFERENCE THAT THE REQUISITE SATISFACTION WAS ARRIVED AT BY THE ASSESSING OFFICER. HON'BLE DELHI HIGH COURT HELD THAT IT IS THE ASSESSING AUTHOR ITY WHICH HAS TO FORM ITS OWN OPINION AND RECORD ITS SATISFACTION BEFORE INITIATING PENALTY PROCEEDING. MERELY BECAUSE THE PENALTY PROCEEDING HAVE BEEN INITIATED, IT CANNOT BE ASSUMED THAT SUCH A SATISFACTION WAS ARRIVED AT IN THE ABSENCE OF THE SAME BEING SPELT OUT BY THE ORDER OF THE ASSESSING AUTHORITY. THIS JUDGMENT HAS BEEN FOLLOWED BY THE VARIOUS HIGH COURTS IN VARIOUS CASES. AFTER CONSIDERING ALL THE JUDGMENTS ON THIS ASPECT, HON'BIE DELHI HIGH COURT AGAIN IN THE CASE OF MS MADHUSHREE GUPTA VS UOI ( 183TAXMANN 100) HAS HELD AS UNDER: '15.6 - AS INDICATED HEREINABOVE THE POSITION IS NO DIFFERENT POST - AMENDMENT. THE CONTRA SUBMISSION OF THE LD. ASG THAT PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER NEED NOT BE REFLECTED AT THE STAGE OF INITIATIO N BUT ONLY AT THE STAGE OF IMPOSITION OF PENALTY IS IN THE TEETH OF SECTION 271(1)(C) OF THE ACT. SECTION 271(1)(C) HAS TO BE READ IN CONSONANCE OF SECTION 271(1B). THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITIATION ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 17 OF PENALTY PROCEEDING WAS AND REMAI NS A JURISDICTIONAL FACT WHICH CANNOT BE WHISKED AWAY AS THE PROVISIONS STANDS EVEN TODAY, I.E., POST AMENDMENT. IF AN INTERPRETATION SUCH AS THE ONE PROPOSED BY THE REVENUE FOR SECTION 271(1B) IS ACCEPTED THEN, IN OUR VIEW, THE IMPUGNED PROVISION (SECTION 271(1B)) WILL FALL FOUL OF ARTICLE 14 OF THE CONSTITUTION AS IT WILL THEN BE IMPREGNATED WITH THE VICE OF ARBITRARINESS. THE ASSESSING OFFICER WOULD IN SUCH A SITUATION BE IN A POSITION TO PICK A CASE FOR INITIATION OF PENALTY MERELY BECAUSE THERE IS AN A DDITION OR DISALLOWANCE WITHOUT ARRIVING AT A PRIMA FACIE SATISFACTION WITH RESPECT TO INFRACTION BY THE ASSESSEE OF CLAUSE (C) OF SUB - SECTION (1) OF SECTION 271 OF THE ACT. A REQUIREMENT, WHICH IS MANDATED BY THE PROVISION ITSELF'. THE ABOVE JUDGMENT IS LOCUS CLASSICUS ON THE INTERPRETATION OF SECTION 271 (1B) OF THE ACT. IN VIEW OF THIS JUDGMENT RELIANCE PLACED BY THE ASSESSING OFFICER ON SECTION 271(1B) OF THE ACT IS INCORRECT WHEN IT READ THE SAID PROVISION IN AN ISOLATED MANNER WITHOUT OBSERVING THA T HE HAD NOT SATISFIED HIMSELF DURING THE ASSESSMENT PROCEEDING QUA CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 04) EVERY PENALTY PROCEEDING PRESUPPOSES A VALID ASSESSMENT. AN INVALID ASSESSMENT CANNOT GIVE RISE TO VALID PENA LTY PROCEEDING, SINCE PENALTY PROCEEDING UNDER SECTION 271 ARE INITIATED IN THE COURSE OF ASSESSMENT PROCEEDING WHICH SHOULD MEAN ONLY VALID PROCEEDING. SUPREME COURT IN C.A. ABRAHAM VS ITO (41 ITR 425) HAVE HELD THAT PENALTY THOUGH DISCRETIONARY, IS PART OF THE MACHINERY FOR ASSESSMENT OF TAX LIABILITY AND HAS THE CHARACTER THEREFORE, OF AN ADDITIONAL TAX. HENCE PENALTY PROCEEDING SHOULD BE VULNERABLE IN A CASE WHERE ASSESSMENT PROCEEDING IS BAD IN LAW. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 18 THE PRESENT CASE IS THE GLARING INSTANCE WHERE THE REASSESSMENT PROCEEDING IS NOT SUSTAINABLE IN LAW FOR THE FOLLOWING AMONGST OTHER REASONS: - I) THE REASONS RECORDED BY THE ASSESSING OFFICER U/S 148 ARE INCORRECT WHEN IT STATED THAT THE INFORMATION U/S 133(6) WERE CALLED FROM CANARA BANK BUT THE SAME WA S NOT RECEIVED TILL 30.12.2009 I.E. THE DATE OF PASSING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT. IN FACT, THE COPY OF BANK STATEMENT WAS FURNISHED BY THE CANARA BANK ON 24.12.2009 ITSELF AND THE SAME WAS BEFORE THE ASSESSING OFFICER AT THE TIME OF PASSI NG ASSESSMENT ORDER. RATHER, ASSESSING OFFICER HAD SATISFIED HIMSELF ABOUT THE ENTRIES OF RS.50 LAC, WHICH WERE EXISTING THE BANK STATEMENT. THE ASSESSING OFFICER HAD EXAMINED THE BOOKS OF ACCOUNTS ON 21.12.2009 AND AGAIN ON 30.12.2009 IN PURSUANCE TO INFO RMATION RECEIVED BY HIM BY WAY OF SALES TAX ASSESSMENT ORDER FROM TRADE TAX DEPARTMENT AND THE BANK STATEMENT FROM CANARA BANK. THE ENTRIES OF RS.50 LAC WERE EXISTING IN THE LEDGER, WHICH WERE DEBITED AND CREDITED TO MOHD. IRSHAD PERSONAL FUND ACCOUNT. THU S VERY BASIS FOR INITIATING THE PROCEEDING U/S 147 OF THE ACT WAS INCORRECT. THIS FACT HAS BEEN ADMITTED BY THE CIT(A) ALSO WHEN HE OBSERVED AT PAGE 23 OF THE ORDER THAT THE COPY OF BANK ACCOUNT WAS FURNISHED BY CANARA BANK ON 24.12.2009, BEFORE COMPLETIO N OF THE ASSESSMENT PROCEEDING ON 30. 12.2009, HOWEVER, DUE TO REMISSNESS ON THE PART OF ASSESSING OFFICER, THE INFORMATION OBTAINED FROM BANK ON 24.12.2009 WAS NOT TAKEN COGNIZANCE. THUS NEGLIGENCE OR INACTION ON THE PART OF ASSESSING OFFICER CANNOT GIVE RISE TO INITIATION OF PROCEEDING U/S 147 /148 OF THE ACT MUCH LESS THE PENALTY PROCEEDING. II) SIMILARLY, THE ASSESSEE HAD DULY OBJECTED TO THE INITIATION OF REASSESSMENT PROCEEDING VIDE LETTER - DATED 21.09.2010, HOWEVER, THE ASSESSING OFFICER DID NOT DI SPOSE OFF THESE OBJECTIONS BEFORE CONTINUING WITH THE ASSESSMENT PROCEEDING. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 19 THUS THE PROCEDURE ADOPTED BY THE ASSESSING OFFICER WAS CONTRARY TO THE LAW ENUNCIATED BY THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. (259 ITR 19) AND TH EREFORE, WAS BAD - IN - LAW. III) THE REASSESSMENT PROCEEDING WAS BASED ON MERE CHANGE OF OPINION AND THEREFORE, THE SAME WAS. NOT SUSTAINABLE IN LAW IN VIEW OF THE JUDGMENT OF FULL BENCH OF DELHI HIGH COURT IN THE CASE OF KELVINATOR OF INDIA (256 ITR 1) A S CONFIRMED BY THE HON'BLE SUPREME COURT IN 320 ITR 561. HON'BLE SUPREME COURT HAS OBSERVED THAT THE SCHEMATIC INTERPRETATION HAS TO BE GIVEN TO THE WORDS REASON TO BELIEVE SO THAT THE POWER U/S 147 MAY NOT BE MISUNDERSTOOD AS CONFERRING ARBITRARY POWERS O N 'MERE CHANGE OF OPINION' WHICH CANNOT PER SE BE A REASON FOR JURISDICTION. THE POWER TO RE - ASSESS IS DIFFERENT FROM POWER TO REVIEW WHICH IS NOT PERMISSIBLE. IT FOLLOWS THAT REVIEW CANNOT BE UNDERTAKEN IN THE GARB OF REASSESSMENT. THE BAR AGAINST CHANGE OF OPINION IS AN INBUILT REQUIREMENT TO CHECK ABUSE OF POWER. IV) THE ASSESSING OFFICER HAS IGNORED THE FACTUM OF EXISTENCE OF ENTRIES OF RS. 50 LAC IN THE LEDGER OF ASSESSEE MAINTAINED IN THE REGULAR COURSE OF BUSINESS BY STATING THAT THE ACCOUNT NAMELY MOHD. IRSHAD PERSONAL FUND ACCOUNT WAS NOT EXISTING IN THE IMMEDIATELY PRECEDING AND SUBSEQUENT ASSESSMENT YEARS. SUCH AN OBSERVATION BY THE ASSESSING OFFICER SHOWS NON - APPLICATION OF MIND OR THE VERY FEEBLE KNOWLEDGE OF THE ACCOUNTING POLICIES ON HIS PAR T. IT IS NEEDLESS TO SAY THAT EACH YEAR IS A SEPARATE YEAR. ACCOUNTS IN THE LEDGERS ARE NOTHING BUT POSTING OF ENTRIES FROM THE PRINCIPAL BOOK OF ACCOUNTS. IF THE ENTRIES ARE IN THE BASIC BOOKS I.E. CASH BOOK OR THE BANK BOOK OR THE JOURNAL THEN THE SAME W OULD BE REFLECTED IN THE LEDGER. THE ENTRIES REGARDING RS.50 LAC WERE IN THE BANK BOOK OF THE ASSESSEE IN THE RELEVANT YEAR AND THEREFORE, WERE EXISTING IN THE LEDGER. THERE WERE NO ENTRIES PERTAINING TO 'MOHD IRSHAD PERSONAL FUND ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 20 ACCOUNT' IN THE IMMEDIATE LY PRECEDING AND SUBSEQUENT YEAR AND THEREFORE, THE SAID ACCOUNT WAS NOT EXISTING IN THE LEDGER OF THOSE YEARS. HENCE, THE CONCLUSION DRAWN BY THE ASSESSING OFFICER THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE FABRICATED IS INCORRECT IN THE FACTS AND CI RCUMSTANCES OF THE CASE. HENCE, THE REASSESSMENT PROCEEDING INITIATED BY THE ASSESSING OFFICER WAS NOT SUSTAINABLE IN LAW AND THEREFORE, ANY SATISFACTION ARRIVED AT IN SUCH PROCEEDING FOR INITIATING THE PENALTY PROCEEDING IS ALSO BAD - IN - LAW. ACCORDINGLY, T HE PENALTY IMPOSED IN PURSUANCE TO SUCH SATISFACTION IS LIABLE TO BE DELETED. THE ASSESSEE IS CHALLENGING THE REASSESSMENT PROCEEDING ONLY FOR THE PURPOSE THAT THE EVERY PENALTY PRESUPPOSES A VALID ASSESSMENT PROCEEDING. HENCE, PENALTY IMPOSED IN PURSUAN CE TO SUCH AN INVALID ASSESSMENT IS LIABLE TO BE QUASHED. HOWEVER, IT IS TO BE POINTED OUT THAT THE QUANTUM APPEAL, CHALLENGING THE INITIATION OF PROCEEDING U/S 147, IS PENDING BEFORE ITAT. V) THAT THE INFORMATION ON THE BASIS OF WHICH PROCEEDING WAS INI TIATED WAS ALREADY EXISTING BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDING AND WAS CONSIDERED BY HIM. NO NEW INFORMATION CAME WITHIN THE KNOWLEDGE OF ASSESSING OFFICER SO AS TO FORM THE BELIEF THAT INCOME IN THE CASE OF ASSESSEE HAD ESCAPED ASSESSMENT. THE ASSESSING OFFICER HAD DULY EXAMINED THE BOOKS OF ACCOUNTS DURING THE ORIGINAL ASSESSMENT PROCEEDING AND THEREFORE, PROCEEDING INITIATED ON THE BASIS OF MERE CHANGE OF OPINION WAS BAD - IN - LAW. 05) DURING REASSESSMENT PROCEEDING, A SSESSEE HIMSELF HAD SURRENDERED RS. 50 LAC. SURRENDER WAS BONAFIDE AND WAS MADE WITH CLEAN HANDS TO AVOID ANY DISPUTE IN FUTURE, TO AVOID ANY LITIGATION AND TO PURCHASE PEACE OF MIND SUBJECT TO NO PENAL ACTION. HE ALSO HANDED OVER THE CHEQUE OF RS.10 LAC TOWARDS TAX LIABILITY ON SUCH AMOUNT WITH A REQUEST TO PAY THE BALANCE ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 21 AMOUNT LATER ON FROM THE FAMILY FUND AND TO WAIVE THE INTEREST U/S 234 - A, 234 - B AND 234 - C. IN THE SAID SURRENDER ASSESSEE HAD ALSO EXPLAINED THE SOURCE OF RS.50 LAC AS RS.10 LAC OUT OF RS.12 LAC RECEIVED FROM FATHER BEFORE 40 YEARS IN PURSUANCE TO FAMILY ARRANGEMENT AND RS.40 LAC AS ADVANCE MONEY RECEIVED FOR SALE OF TWO HOUSES ONE AT CHARTHAWAL AND ANOTHER AT MUZAFFARNAGAR. THUS ASSESSEE HAD EXPLAINED THE SOURCE OF RS.50 LAC WHICH WERE DULY ENTERED INTO THE BOOKS OF ACCOUNTS. HENCE, PROVISIONS OF EXPLANATION WERE NOT ATTRACTED TO THE PRESENT CASE AS ASSESSEE HAD OFFERED AN EXPLANATION AND HAD ALSO SUBSTANTIATED THE SAME, THE EXPLANATION OFFERED BY HIM WAS BONAFIDE. MOREOVER, ALL THE FACT S MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAD BEEN DISCLOSED BY HIM. IN FACT, THE AMOUNT OF RS.50 LAC WAS NOT HIS INCOME BUT IN ORDER TO AVOID ANY LITIGATION OR TO AVOID FUTURE DISPUTE, HE HAD SURRENDERED THE SAME. HENCE, THE OBSERVATION OF THE ASS ESSING OFFICER THAT THE ASSESSEE HAD CONCEALED AND FURNISHED INACCURATE PARTICULARS OF INCOME WAS INCORRECT. 06) IN S V KALYANAM VS ITO (327 ITR 477) , MADRAS HIGH COURT HAVE HELD THAT SECTION 69 IS A DEEMING PROVISION AND THE SAME CANNOT BE EXTENDED TO P ENALTY PROCEEDING. THE DEPARTMENT CANNOT PRESUME THAT THERE IS A CONCEALMENT. THERE MUST BE AN INDEPENDENT FINDING BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD CONCEALED THE INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. 07) IN CIT VS MAHAVI R IRRIGATION (P) LTD. (202 TAXMANN 415) , DELHI HIGH COURT HAVE HELD THAT WHERE ASSESSEE HAD DISCLOSED RECEIPT OF IMPUGNED AMOUNT FROM A PARTY, THOUGH AS, A LIABILITY AND ASSESSING OFFICER HAD ALSO GONE INTO THAT ASPECT SPECIFICALLY AND DID NOT TREAT THE SA ID RECEIPT AS INCOME, SUCH FACT WOULD DEMONSTRATE THAT ASSESSEE HAD NOT CONCEALED PARTICULARS OF INCOME NOR HAD IT DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 22 08) IN CIT VS RAJDEV SINGH & COMPANY (202 TAXMANN 433) , DELHI HIGH COURT HAVE HELD THAT WHERE ASSESSEE HAD DISCLOSED AMOUNT IN ENTIRETY, PRODUCED BOOKS OF ACCOUNTS AND CLAIMED DEDUCTION WHICH WAS ALLOWED AND THEREAFTER, THERE WAS A REASSESSMENT, IMPOSITION OF PENALTY U/S 271(1)(C) IS NOT JUSTIFIED. 09) THE ASSESSING OFFICER HAS ACCEPTE D THE SURRENDER BUT HAS NOT ACCEPTED THE CONDITIONS SUBJECT TO WHICH SURRENDER WAS MADE. IT IS A WELL ESTABLISHED PRINCIPLE OF LAW THAT ADMISSIONS HAVE TO BE READ AS A WHOLE AND IN THE CONTEXT IN WHICH, THEY ARE MADE AND NOT DE HORS THE CONTEXT. THE ADMISS ION OF THE ASSESSEE THAT HE HAD NO PROPER EXPLANATION FOR A CERTAIN AMOUNT DOES NOT IPSO FACTO ABSOLVE THE REVENUE OF ITS BURDEN OF PROVING THAT THE AMOUNT WAS THE INCOME OF THE ASSESSEE FOR THE RELEVANT YEAR AND OR THERE WAS ANY FRAUD OR NEGLIGENCE ON HIS PART TO INVOKE THE PENALTY PROCEEDING. KINDLY SEE CIT VS NAVNEET LAL POCHA LAL (213 ITR 69) (GUJ) PATAO BROS VS CIT (133 ITR 672) (GAU) 10) WHERE THE ASSESSEE AGREES TO INCLUSION OF CASH CREDIT AS INCOME, THERE IS NO ADMISSION THAT CASH CREDIT REPRES ENTED UNDISCLOSED INCOME. IF THERE IS NO EVIDENCE TO PROVE CONCEALMENT OF INCOME BY THE ASSESSING OFFICER, PENALTY CANNOT BE LEVIED. KINDLY SEE CIT VS PARIPUSHPAM (S.I.) (249 ITR 550) (MAD) CIT VS GARG TRADERS (253 ITR 736) (P&H) CIT VS SURESH KUMAR BA NSAL (254 ITR 130) (P&H) CIT VS JALARAM OIL MILLS (253 ITR 192) (GUJ) 11) IN THE FOLLOWING CASES, IT IS HELD THAT ADMISSION CANNOT BE A GROUND FOR PENALTY WHERE IT IS MADE FOR PURCHASING PEACE WITH THE DEPARTMENT ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 23 CIT VS PIONEER ENGINEERING SYNDICATE (188 ITR 287)(MAD) CIT VS PUNJAB TYRES (162 ITR 517)(MP) 12) IN THE FOLLOWING CASES, ALLAHABAD HIGH COURT HAVE HELD THAT MERE ADMISSION DOES NOT JUSTIFY PENALTY EVEN IN THE LIGHT OF EXPLANATION TO SECTION 271(1)(C) OF THE ACT. 13) IN THESE CASES SURR ENDER WAS MADE BY THE ASSESSEE ON THE CONDITION THAT NO PENALTY WOULD BE LEVIED. CIT VS SARAN KHANDSARI SUGAR WORKS (246 ITR 216 (ALD) CIT VS MANSA RAM & SONS (106 ITR 307) (ALD) 14) IN CIT VS TRADERS & TRADERS (244 ITR 367) , MADRAS HIGH COURT HAVE HE LD THAT WHERE INCOME IS INFERRED FROM CIRCUMSTANCES, SO AS TO JUSTIFY THE ADDITION, BUT THERE IS NO POSITIVE EVIDENCE THAT THE INFERRED INCOME WAS ACTUALLY RECEIVED BY THE ASSESSEE, PENALTY CANNOT BE JUSTIFIED, NOTWITHSTANDING EXPLANATION 1 TO SECTION 271( 1)(C) WHICH DEEMS CONCEALMENT. 15) IN CIT VS CAREERS EDUCATION & INFOTECH (P) LTD. (336 ITR 257) , PUNJAB & HARYANA HIGH COURT HAVE HELD THAT IN EVERY CASE WHERE SURRENDER IS MADE, INFERENCE OF CONCEALMENT OF INCOME CANNOT BE DRAWN U/S 58 OF EVIDENCE ACT. 16) IN CIT VS GUJAMGADI (M.M.) (290 ITR 168) , KARNATAKA HIGH COURT HAVE HELD THAT WHERE THE ASSESSEE CONCEDES AN ADDITION, IT DOES NOT AUTOMATICALLY FOLLOW THAT THE AMOUNT CONCEDED REPRESENTED CONCEALED INCOME. ADDITIONS WERE MADE ON ACCOUNT OF CASH CRE DITS BECAUSE OF INABILITY OF THE ASSESSEE, IN SPITE OF HIS BEST EFFORTS, TO PRODUCE THE CREDITORS, SUCH CONCESSION AND CONSEQUENT ADDITION CAN ONLY BE TAKEN TO BE ADDITION FOR LAC OF PROOFS AND NOT ANY POSITIVE CONCEALMENT. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 24 17) IN NATIONAL TEXTILES VS CI T (249 ITR 125) , GUJARAT HIGH COURT HAVE HELD WHERE ASSESSEE S EXPLANATION IS UNPROVED BUT NOT DISPROVED BY THE ASSESSING OFFICER, RELIANCE ON EXPLANATION 1 TO SECTION 271(1)(C) IS NOT ENOUGH FOR LEVY OF PENALTY. 18) THE ASSESSING OFFICER HAS LEVIED THE PENALTY STATING THAT THERE IS NO PROMISSORY ESTOPPEL AGAINST STATUTE AND THEREFORE, NO CONDITION CAN BE ATTACHED WITH AGREED ADDITION FOR SURRENDER. IT IS SUBMITTED THAT ESTOPPEL HAS BEEN HELD TO BE ONLY A RULE OF EVIDENCE AND NOT A CAUSE OF ACTION. IT IS NOT A BASIS OF LIABILITY TO ASSESSMENT ORDER UNDER THE ACT. HENCE, THE ASSESSMENT OF A PERSON FOR AN AMOUNT OF INCOME WHICH DOES NOT BELONG TO HIM CANNOT BE BASED ON THE GROUND THAT HE HIMSELF WANTED TO BE ASSESSED ON IT AS HELD BY THE CALCUTTA HIGH COURT IN ASIT KUMAR GHOSE VS CIT (24 ITR 576) . 19) LAST BUT NOT THE LEAST, IT IS HUMBLY SUBMITTED THAT THE LAW IS WELL SETTLED; AN ORDER IMPOSING PENALTY IS A RESULT OF QUASI - CRIMINAL PROCEEDINGS AND PENALTY CANNOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGE D EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT, CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. NO PENALTY COULD BE IMPOSED IF THE ASSESSEE WAS ACTING IN HONEST AND GENUINE BELIEF IN A PARTICULAR MANNE R AS HELD BY THE HON'BLE SUPREME COURT IN HINDUSTAN STEEL LIMITED VS STATE OF ORISSA (83 ITR 26). PENALTY SHOULD NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTE R OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIOUSLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. IN THE PRESENT CASE, THE ASSESSEE IS AN ILLITERATE PERSON. DESPITE THE ADVICE OF LEGAL CONSULTANT THAT THE REASSESSMENT PROCEEDING INIT IATED BY THE ASSESSING OFFICER IS BAD - IN - LAW AS BASED ON ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 25 MERE CHANGE OF OPINION, HE SURRENDERED THE AMOUNT OF RS.50 LAC WITH CLEAN HANDS, IN ORDER TO AVOID FUTURE LITIGATION AND ALSO TO BUY A PEACE. HE SURRENDERED THE AMOUNT SUBJECT TO NO PENAL ACTION. HEN CE, THE PENALTY IMPOSED IN THE PRESENT CASE IS LIABLE TO BE DELETED IN THE INTEREST OF JUSTICE. WE HAVE ALSO GONE THROUGH THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. MANGA RAM & SONS 107 ITR 307 (ALL.) AND THAT OF CIT VS. SARANKHAN S IRI SUGAR WORKS 246 ITR 216 (ALL.). IN THESE CASES ALSO THE PROPOSITION OF THE LAW LAID DOWN BY THE HON'BLE HIGH COURT ARE THAT IF THE INCOME IS SURRENDERED WITH THE CONDITION THAT NO PENALTY BE IMPOSED ON THE ASSESSEE. THE ASSESSING OFFICER IS NOT JUSTIFI ED IN IMPOSING THE PENALTY.....' 3.1.1 THE APPELLANT HAS FURTHER FURNISHED WRITTEN SUBMISSIONS DATED 07 - 05 - 2013 WHICH ARE REPRODUCED AS UNDER: - IT IS CONFRONTED THAT WHERE CONCEALMENT IS DETECTED, LEVY OF PENALTY IS UPHELD IN FOLLOWING CASES: CIT VS A SREENIVASA PAI (KER) 242 ITR 29 M N RAJARAMAN VS DCIT (ITAT, CHENNAI) 119 ITD 362 LMP PRECISION ENGG. CO. LTD. VS DCIT(GUJ) 330 ITR 93 'VOLUNTARILY' MEANS OUT OF FREE WILL WITHOUT ANY COMPULSION. IF DEPARTMENT HAS INCRIMINATING MATERIAL WITH REGARD T O DISCLOSED INCOME, DISCLOSURE IS NOT VOLUNTARY AND VICE VERSA. K L SWAMY VS CIT (KAR) 239 ITR 386 - SEARCH IN THIRD PARTY'S PREMISES ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 26 M N RAJARAMAN VS ACIT (ITAT, CHENNAI) 119 ITD 362 SIMPLY BECAUSE ASSESSEE AGREED TO ADDITION OF CONCEALED INCOME AFTE R DETECTION THEREOF AND FILED RETURN IN RESPONSE TO NOTICE U/S 148 OFFERING ADDITIONAL INCOME, ASSESSEE CANNOT ESCAPE FROM PENALTY U/S 271(1)(C) P C JOSEPH & BROS VS CIT (KER) 243 ITR 818 CIT VS RAKESH SURI (ALL) 331 ITR 458 CIT VS SUSHMA DEVI AGARWAL (ITAT, KOL - TM) 67 DTR 430 B) WHETHER ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME IS A FINDING OF FACT AND DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE EACH CASE HAS TO BE EXAMINED BY THE FACTS INVOLVED THEREIN. IN ALL THESE AFORE CITED CASES, CONCEALMENT HAS BEEN DETECTED WHY THE DEPARTMENT BEFORE THE DISCLOSURE MADE BY THE ASSESSEE AND THEREFORE, IT IS OBSERVED THAT THE DISCLOSURE MADE BY THE ASSESSEE WAS NOT VOLUNTARY AND IN GOOD FAI TH. EACH CASE HAS BEEN BRIEFLY DISCUSSED AS UNDER: I) 242 ITR 29 (KER) CIT VS A SREENIVASA PAI IN THIS CASE, ASSESSEE FILED THE RETURN ON 29.06.1987 FOR AY 1987 - 88 AFTER FILING THE RETURN, SCRUTINY NOTICE WAS ISSUED VARIOUS BOOKS OF ACCOUNTS. THE CASE WAS POSTED FOR SCRUTINY ON 29.09.1987. WHEN THE ASSESSEE'S REPRESENTATIVE APPEARED BEFORE THE AO, THE DATE WAS ADJOURNED TO THE NEXT DATE WHEN SEVERAL BOOKS OF ACCOUNTS WERE IMPOUNDED FOR SCRUTINY OF THE CORRECTNESS OF THE ENTRIES MADE THEREIN. 15 DAYS TI ME AVAILABLE FOR RETENTION EXPIRED AND BEFORE THAT DATE, THE CIT'S ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 27 PERMISSION FOR FURTHER RETENTION WAS SOUGHT. SUMMONS WERE ISSUED TO VARIOUS PERSONS. THE ASSESSEE WAS SERVED WITH A COPY OF PROCEEDING BY THE CIT SANCTIONING CONTINUED RETENTION OF BOOKS OF ACCOUNTS. ON 14 TH OCTOBER 1987, INSPECTOR'S REPORT AFTER VERIFICATIONS AND INQUIRIES WAS RECEIVED. ON 16 TH OCT 1987, ASSESSEE FILED A REVISED RETURN OFFERING AN ADDITIONAL INCOME FOR TAXATION UNDER THE HEAD 'OTHER SOURCES'. THE AO INITIATED PENALTY PROCE EDING U/S 271(1)(C) ON THE VIEW THAT THE REVISED RETURN FILED BY THE ASSESSEE ADMITTING HIRE INCOME COULD NOT BE TREATED AS VOLUNTARY AS THE SAME WAS FILED ONLY AFTER THE DEPARTMENT HAD STARTED INQUIRIES WITH REGARD TO CREDIT BALANCES AND WITH REGARD TO DE MAND DRAFT ACCOUNTS. THE TRIBUNAL CANCELLED THE PENALTY. HOWEVER, KERALA HIGH COURT HELD THAT THE REVISED RETURN WAS FILED AS AN ATTEMPT TO PLUG LOOPHOLES AFTER DETECTION AND IT WAS NOT INTENDED TO BRING ON RECORD THE MATERIALS WHICH WERE DISCOVERED SUBSE QUENT TO THE FILING OF RETURN. HENCE PENALTY WAS IMPOSSIBLE. II) 330 ITR 93 (GUJ) LMP PRECISION ENGINEERING CO. LTD. VS DCIT IN THIS CASE, SURVEY WAS CONDUCTED DURING WHICH IT WAS FOUND THAT THE PURCHASES MADE BY THE ASSESSEE WERE NOT GENUINE. BEFORE T HE ASSESSMENT PROCEEDING, COULD BE FINALLY CONCLUDED ASSESSEE FILED A DECLARATION U/S 273A OF THE ACT DECLARING ADDITIONAL INCOME OF RS.54.71 LAC FOR AY 1985 - 86 AND RS.18 LAC EACH FOR AY 1986 - 87, 1987 - 88 AND 1988 - 89. HE ALSO FILED REVISED RETURNS FOR 03 YE ARS. AO REGULARIZED THEM BY ISSUING NOTICE U/S 148. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 28 GUJARAT HIGH COURT HAVE HELD THAT IT WAS ONLY AFTER THE DETECTION BY THE DEPARTMENT THAT ASSESSEE HAD MADE DISCLOSURE. THEREFORE, ASSESSEE COULD NOT BE STATED TO HAVE VOLUNTARILY COME FORWARD TO DISCLOS E INCOME WHICH HAD UNINTENTIONALLY BEEN OMITTED FROM THE ORIGINAL RETURN OF INCOME. HENCE PENALTY FOUND TO BE VALID. III) 239 ITR 386 (KAR) K L SWAMY VS CIT IN THIS CASE, ASSESSEE HAD FILED APPLICATION FOR WAIVER OF PENALTY WHICH HAD BEEN REJECTED BY THE CIT AGAINST WHICH, WRIT PETITION WAS FILED. KARNATAKA HIGH COURT HELD THAT THE DISCLOSURE HAD COME AFTER AN INITIAL DENIAL OF MAKING OF PAYMENT TOWARDS PURCHASE OF ESTATE AND ONLY WHEN THE SELLER OFFERED HIMSELF FOR CROSS EXAMINATION IN SUPPORT OF HI S VERSION THAT SUCH A PAYMENT WAS MADE. ASSESSEE IS ENTITLED TO WAIVER OF PENALTY ONLY WHEN HE HAD MADE A DISCLOSURE BY FILING REVISED RETURN VOLUNTARILY ENDING GOOD FAITH. IV) 230 ITR 855 (AII) BHAIRAV LAL VERMA VS UOI FULL BENCH OF THE ALLAHABAD HIG H COURT IN THIS CASE, HAVE CURLED OUT THE FOLLOWING PRINCIPLE: THE WORD 'VOLUNTARILY' IN SECTION 273A OF THE ACT MEANS OUT OF FREE WILL WITHOUT ANY COMPULSION. VOLUNTARY DISCLOSURE OF INCOME MEANS THE DISCLOSURE OF INCOME OUT OF FREE WILL WITHOUT ANY COM PULSION/CONSTRAINT. AS A PRINCIPLE OF LAW IT CANNOT BE HELD THAT THE DISCLOSURE OF THE CONCEALED INCOME AFTER THE RAID OR SEARCH CANNOT BE VOLUNTARY. IT IS A QUESTION WHICH HAS TO BE DECIDED BY THE DEPARTMENT IN EACH CASE ON THE BASIS OF THE MATERIAL AVAI LABLE ON THE RECORD. THE CRITERIA FOR DECIDING THIS ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 29 QUESTION IS TO FIND OUT AS TO WHETHER THE DEPARTMENT HAS ANY INCRIMINATING MATERIAL WITH REGARD TO THE DISCLOSED INCOME. IF THE ANSWER IS IN. THE AFFIRMATIVE, THE DISCLOSURE CANNOT BE SAID TO BE VOLUNTARY . BUT IF THE DEPARTMENT HAS NO INCRIMINATING MATERIAL WITH REGARD TO THE INCOME DISCLOSED, THE DISCLOSURE IS LIABLE TO BE TREATED AS VOLUNTARY EVEN IF IT WAS MADE AFTER RAID/SEARCH. OBSERVATIONS MADE IN THIS CASE SUPPORT THE CASE OF THE ASSESSEE. V) 2 43 ITR 818 (KER) P C JOSEPH & BROS VS CIT IN THIS CASE, AFTER COMPLETION OF ORIGINAL ASSESSMENT, A SEARCH WAS CONDUCTED IN THE CASE OF ASSESSEE. ON SCRUTINY OF BOOKS OF ACCOUNTS TOGETHER WITH THE SEIZED DOCUMENTS, RELEVANT TO THE YEAR UNDER CONSIDERATION I.E. AY 1974 - 75, THE AO NOTICED THAT ASSESSEE HAD MADE CREDIT SALES BUT HAD SHOWN THEM AS CASH SALES IN THE BOOKS OF ACCOUNTS. IN RESPONSE TO NOTICE U/S 148, ASSESSEE FILED THE RETURNS OFFERING ADDITIONAL INCOME FOR AY 1970 - 71 TO 1973 - 74. REASSESSMENTS WE RE COMPLETED ON THAT BASIS AND PENALTY PROCEEDING WAS ALSO INITIATED AND PENALTY IMPOSED. HON'BLE HIGH COURT HELD THAT THE RETURN IN RESPONSE TO NOTICE U/S 148 CANNOT BE TREATED AT PAR WITH OR COMPARED TO A REVISED RETURN. THAT BEING THE POSITION, THE FILI NG OF THE RETURN INCLUDING THE AGREED CONCEALED INCOME DID NOT CONSTITUTE A MITIGATING CIRCUMSTANCE AND PENALTY HAS BEEN RIGHTLY LEVIED. VI) 331 ITR 458 (ALL) CIT VS RAKESH SURI DURING THE 'ASSESSMENT PROCEEDING, AO REQUIRED THE ASSESSEE TO FURNISH DE TAILS OF SALE OF SHARES IN RESPECT OF WHICH, LONG TERM CAPITAL GAIN WAS SHOWN. ASSESSEE DID ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 30 NOT FURNISH DETAILS, HIS STATEMENT THAT SHARES WERE SOLD THROUGH DELHI STOCK EXCHANGE WAS ALSO FOUND TO BE FALSE. ON REPEATED INQUIRY, ASSESSEE SURRENDERED THE AMOU NT. AO TREATED THE SAME AS INCOME FROM UNDISCLOSED SOURCES AND LEVIED PENALTY. ALLAHABAD HIGH COURT HAVE HELD THAT IN THIS CASE, ASSESSEE DID NOT FURNISH ANY DETAIL. HENCE HIS ACTION SURRENDERING THE INCOME WAS NEITHER BONAFIDE NOR VOLUNTARY. HENCE LEVY OF PENALTY WAS CONFIRMED. C) ON CRITICALLY EXAMINING, IT REVEALS THAT IN ALL THESE CASES, CONCEALMENT WAS FOUND BY THE DEPARTMENT BEFORE FILING THE REVISED RETURN. THE AO HAD INCRIMINATING MATERIAL IN HIS POSSESSION TO PROVE THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS FALSE OR THAT THE ASSESSEE HAD CONCEALED THE INCOME AT THE TIME OF FILING THE ORIGINAL RETURN. HOWEVER, IN THE PRESENT CASE, NO INCRIMINATING MATERIAL WAS IN THE POSSESSION OF AO TO PROVE THAT THE AMOUNT SURRENDERED BY THE ASSESSEE WAS CO NCEALED INCOME. IN THE ASSESSMENT PROCEEDING ITSELF, ASSESSEE HAD EXPLAINED THAT THE AMOUNT OF RS.10 LAC (OUT OF TOTAL RS.50 LAC) WAS RECEIVED FROM THE FATHER DURING FAMILY ARRANGEMENT AND RS. 40 LAC WAS THE ADVANCE MONEY RECEIVED IN APRIL 2006 FOR SALE OF TWO HOUSES AT CHARTHAWAL AND MUZAFFARNAGAR. DESPITE THE REASSESSMENT PROCEEDING, OPINED TO BE INVALID BY THE LEGAL CONSULTANTS, ASSESSEE SURRENDERED THE AMOUNT OF RS.50 LAC. SURRENDER WAS BONAFIDE AND WAS MADE WITH CLEAN HANDS TO AVOID ANY DISPUTE IN FUTUR E, TO AVOID ANY LITIGATION AND TO PURCHASE PEACE OF MIND SUBJECT TO NO PENAL ACTION. THUS ASSESSEE HAD EXPLAINED THE SOURCE OF RS.50 LAC, WHICH WERE DULY ENTERED INTO THE BOOKS OF ACCOUNTS. EXPLANATION OFFERED BY THE ASSESSEE WAS BONAFIDE. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 31 D) IT IS SUBMI TTED THAT MERE AGREEMENT TO ADDITION OF INCOME OR SURRENDER OF INCOME DOES NOT IMPLY CONCEALMENT OF INCOME. I) WHERE THE ASSESSEE FAILED TO GIVE SATISFACTORY PROOF OF CERTAIN CASH CREDITS AND SURRENDERED THEM FOR ADDITION TO THE INCOME, IT WAS NOT OPEN T O THE DEPARTMENT TO IMPOSE ON THAT BASIS ALONE PENALTY FOR CONCEALMENT BECAUSE THE ONUS OF PROVING DELIBERATE CONCEALMENT HAD NOT BEEN DISCHARGED BY THE DEPARTMENT. CIT VS NET RAM RAM SWAROOP (88 ITR 213) (ALL) ADDITIONAL CIT VS SOLAR CHEMICALS (P) LTD. (150 ITR 410) (ALL) CIT VS AMALANDU PAUL (145 ITR 439) (CAL) II) WHERE IN RESPECT OF CERTAIN CASH CREDITS, THE ASSESSEE, IN THE COURSE OF REASSESSMENT PROCEEDING, SUBMITTED THAT AS THE LOANS WERE VERY OLD, THE CREDITORS COULD NOT BE TRACED AT THEIR OLD ADDRESSES AND IN ORDER TO HAVE AN AMICABLE SETTLEMENT, HE AGREED TO THE ADDITION OF THE CASH CREDITS TO HIS INCOME, IT IS HELD THAT THERE WAS NO MATERIAL TO ESTABLISH CONCEALMENT AND PENALTY UNDER THE EXPLANATION TO SECTION 271(1)(C) COULD NOT BE LEVIED. CIT VS PRAFULLA KUMAR MALLIK (104 ITR 648)(ORI) CIT VS PRAKASSAM READYMADE STORE (140 ITR 601)(MAD) III) MERE ADDITION TO INCOME AT THE INSTANCE OF THE ASSESSEE WOULD NOT WARRANT A FINDING OF CONCEALMENT AND A CONSEQUENT LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. CIT VS S SANKARAN (241 ITR 825)(MAD) ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 32 IV) WHERE THE ASSESSEE HAD AGREED FOR CONCLUSION OF CASH CREDITS AS INCOME, IT WAS HELD THAT THERE WAS NO ADMISSION THAT CASH CREDITS REPRESENTED UNDISCLOSED INCOME. THUS THERE WAS NO EVIDENCE TO PROVE CONCEALMENT OF INCOME AND PENALTY COULD NOT BE IMPOSED U/S 271(1)(C). CIT VS C J RATHNASWAMY (223 ITR 5) (MAD) E) IT IS SUBMITTED THAT THE DISTINCTION HAS TO BE DRAWN BETWEEN THE CASES, WHERE THE DEPARTMENT HAS THE INCRIMINATING MATERIAL TO PROVE THE C ONCEALMENT BEFORE THE DISCLOSURE MADE BY THE ASSESSEE AND THE CASES WHERE THE DEPARTMENT HAS NOT INCRIMINATING MATERIAL BUT THE ASSESSEE SURRENDERS THE AMOUNT BONAFIDE IN ORDER TO AVOID PROTECTED LITIGATION AND IN ORDER TO BUY PEACE. MERE ADDITION TO INCOM E AGREED TO BY THE ASSESSEE IS NOT PROOF OF CONCEALMENT AND PENALTY CANNOT BE IMPOSED. THE DEPARTMENT MUST ESTABLISH THAT THE AMOUNT IS THE ASSESSEE S INCOME OF THE RELEVANT YEAR. MERE ADMISSION DOES NOT JUSTIFY PENALTY EVEN IN THE LIGHT OF THE EXPLANATION TO SECTION 271(1)(C) OF THE ACT. F) THE DOCTRINE OF PROMISSORY ESTOPPEL IS NOT APPLICABLE TO THE PRESENT CASE AT ALL. IN FACT, THE LD. AO HAS NOT UNDERSTOOD THIS PRINCIPLE. THE TRUE PRINCIPLE OF PROMISSORY ESTOPPEL IS THAT WHERE ONE PARTY HAS BY HIS W ORDS OR CONDUCT MADE TO THE OTHER A CLEAR AND UNEQUIVOCAL PROMISE WHICH IS INTENDED TO CREATE LEGAL RELATIONS OR EFFECT A LEGAL RELATIONSHIP TO ARISE IN THE FUTURE, KNOWING OR INTENDING THAT IT WOULD BE ACTED UPON BY THE OTHER PARTY TO WHOM THE PROMISE IS MADE AND IT IS IN FACT SO ACTED UPON BY THE OTHER PARTY, THE PROMISE WOULD BE BINDING ON THE PARTY MAKING IT AND ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 33 HE WOULD NOT BE ENTITLED TO GO BACK UPON IT, IF IT WOULD INEQUITABLE TO ALLOW HIM TO DO SO HAVING REGARD TO THE DEALINGS WHICH HAVE TAKEN PLACE BETWEEN THE PARTIES. WHAT IS NECESSARY FOR THE PRINCIPLE TO APPLY TO A GIVEN CASE IS ONLY THAT THE PROMISE SHOULD HAVE ALTERED HIS POSITION IN RELIANCE ON THE PROMISE. THE PARTY ASSERTING THE ESTOPPEL MUST HAVE ACTED UPON THE ASSURANCE GIVEN TO HIM MUS T HAVE RELIED UPON THE REPRESENTATIONS MADE TO HIM. THE ALTERATION OF POSITION BY THE PARTY IS THE ONLY INDISPENSABLE REQUIREMENT OF THE DOCTRINE. IN THE PRESENT CASE, ON THE BASIS OF SURRENDER MADE BY THE ASSESSEE THE DEPARTMENT HAS NOT ALTERED HIS POSI TION. HAD THE DEPARTMENT ACTED UPON THE STATEMENT OF THE ASSESSEE THEN THE ASSESSEE WOULD HAVE BEEN STOPPED FROM SAYING THAT THE AMOUNT WAS NOT CHARGEABLE TO TAX AT ALL. THUS IN THE PRESENT CASE, THERE ARE NO CIRCUMSTANCES EXISTING SO AS TO APPLY THE PRINC IPLE OF PROMISSORY ESTOPPEL. THIS PRINCIPLE HAS BEEN' EXPLAINED BY THE HON'BLE SUPREME COURT IN THE CASE OF MOTI LAL PADAM PAT SUGAR MILLS CO. LTD. VS STATE OF UTTAR PRADESH (118 ITR 326) . IN MOTI LAL PADAM PAT'S CASE, HON'BLE SUPREME COURT HAVE HELD THA T THIS DOCTRINE CAN BE INVOKED AGAINST THE GOVT. AS WELL. IN THIS CASE, ON THE BASIS OF AN ANNOUNCEMENT IN A NEWSPAPER THAT THE STATE OF UP HAD DECIDED TO GRANT EXEMPTION FROM SALES TAX FOR A PERIOD OF 03 YEARS TO ALL NEW INDUSTRIAL UNITS IN THE STATE. THI S ANNOUNCEMENT WAS CONFIRMED BY THE ASSESSEE FROM THE DIRECTOR OF INDUSTRY AS WELL BY WAY OF WRITING A LETTER. THEREUPON THE ASSESSEE APPROACHED THE FINANCIERS FOR FINANCING THE PROJECT AND SETUP THE VANASPATI FACTORY. THEREAFTER, THE STATE GOVT. TOOK A PO LICY DECISION ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 34 RESCINDING THE EXEMPTION. ASSESSEE CHALLENGED THE SAME BY WAY OF FILING A WRIT PETITION STATING THAT HE HAD ESTABLISHED THE FACTORY RELYING UPON THE ASSURANCE AND THEREFORE, IT WAS EXEMPTED FROM TAX FOR A PERIOD OF 03 YEARS. HON'BLE SUPREME COURT HELD THAT THE PRINCIPLE OF PROMISSORY ESTOPPEL IS APPLICABLE IN THIS CASE. WHERE THE GOVT. MAKES A PROMISE KNOWING OR INTENDING THAT IT WOULD BE ACTED ON BY THE PROMISE AND, IN FACT, THE PROMISE, ACTING IN RELIANCE ON IT, ALTERS HIS POSITION, THE GO VT. WOULD BE HELD BOUND BY THE PROMISEE AND THE PROMISE WOULD BE ENFORCEABLE AGAINST THE GOVT. AT THE INSTANCE OF THE PROMISEE, NOTWITHSTANDING THAT THERE IS NOT CONSIDERATION FOR THE PROMISE AND THE PROMISE IS NOT RECORDED IN A FORM OF A FORMAL CONTRACT A S REQUIRED BY ARTICLE 299 OF THE CONSTITUTION. EVEN THIS PRINCIPLE HAS BEEN EXPLAINED BY THE KERALA HIGH COURT IN THE CASE OF CIT VS D.K.B. & CO. (243 ITR 618)(KER) AND OBSERVED THAT IT IS FOR THE DEPARTMENT TO CONSIDER THE EXPLANATION OFFERED BY THE ASS ESSEE IN RESPECT OF AN AMOUNT WHICH WAS OFFERED TO BE TAXED. IT IS NOT AUTOMATIC THAT WHENEVER AN AMOUNT HAS BEEN OFFERED BY THE ASSESSEE, PENALTY IS TO BE LEVIED. IN THE PRESENT CASE, THE CIRCUMSTANCES TO APPLY THE PRINCIPLE OF PROMISSORY ESTOPPEL DO NO T ARISE AND THEREFORE, THE OBSERVATION OF THE LD. AO IS MISCONCEIVED. IT IS SUBMITTED THAT THE APPEAL MAY KINDLY BE ALLOWED CONSIDERING THE SUBMISSIONS AND LEGAL POSITION AS EXPLAINED BY APPELLANT...... ' ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 35 9 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE OBSERVED THAT THE AO HAD IMPOSED THE PENALTY U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE SURRENDER MADE AT RS. 50,00,000/ - WAS MADE BY THE ASSESSEE UNDER COMPELLING CIRCUMSTANCES WHEN THE ASSESSEE HAD NO OTHER CHOICE AND THE CONDITI ONS LAID DOWN FOR SURRENDER WERE REJECTED BY THE AO. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE FURNISHED A COPY OF CURRENT BANK ACCOUNT NO. 1682 WITH CANARA BANK, ROORKEE ROAD, MUZAFFARNAGAR AND IN THIS FABRICATED COPY OF BANK ACCOUNT, THE BANK ACC OUNT ENTRY DATED 21.04.2006 SHOWING CASH DEPOSIT AT RS. 50,00,000/ - AND SUBSEQUENT WITHDRAWAL OF THE SAME AMOUNT FOR PREPARATION OF DD ON THE SAME DATE WAS DELIBERATELY OMITTED AND THE AO COMPLETED THE ASSESSMENT MAKING ADDITION OF RS. 50 LAC AND LATER ON IMPOSED PENALTY ON SUCH ADDITION . O N THE ARGUMENT OF THE ASSESSEE THAT SATISFACTION OF CONCEAL MENT WAS NOT RECORDED BY THE AO, T HE LD. CIT(A) OBSERVED THAT THE AO IN HIS LAST SENTENCE OF THE ASSESSMENT ORDER HAS MENTIONED THAT PENALTY NOTICE U/S 271(1)(C) OF THE ACT IS BEING ISSUED SEPARATELY . THE LD. CIT(A) WAS OF THE VIEW THAT THE INITIATION OF PENALTY PROCEEDINGS COUPLED WITH THE OBSERVATION S MADE BY THE AO , IN THE BODY OF ASS ESSMENT ORDER LE FT NO SCOPE FOR ANY DOUBT THAT THE SATISFACTION FOR INITIATIO N OF PENALTY WAS NOT RECORDED IN THE ASSESSMENT ORDER. THE LD. CIT(A) ALSO OBSERVED THAT THE SURRENDER MADE BY THE ASSESSEE WAS NOT VOLUNTARILY AND WITH CLEAN HANDS AND THAT AT NO STAGE THE SURRENDER MADE BY THE ASSESSEE WAS ACCEPTED BY THE AO. THUS, SUCH SURRENDER WAS MADE ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 36 UNDER COMPELLING CIRCUMSTANCES WHICH COULD NOT IN ANY CASE SAID TO BE VOLUNTARILY. HE ALSO OBSERVED THAT THE SURRENDER MADE BY THE ASSESSEE WAS UNILATERAL AND NEVER HAD THE CONSENT OF THE DEPARTMENT THAT NO PENAL ACTION WOULD BE TAKEN IF THE SURRENDER WAS MADE. THE LD. CIT(A) FURTHER OBSERVED THAT THE AO WAS SATISFIED AND DREW UNEQUIVOCAL INFERENCE THAT THE ASSESSEE HAD FURNISHED FABRICATED DOCUMENTS, MADE FALSE STATEMENT AND HENCE CONCEALED THE INCOME BY FURNISHING INACCURATE PARTICULARS OF HIS INCOME AND INITIATED THE PENALTY PROCEEDINGS . THE LD. CIT(A) ALSO OBSERVED THAT EVEN IF THE AO HAD NOT DISPOSED OFF THE OBJECTION S OF THE ASSESSEE FOR REOPENING, THE SAME HAD LOST THE RELEVANCE PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSEE DUR ING THE COURSE OF REASSESSMENT PROCEEDINGS SURRENDER ED THE AMOUNT OF RS. 50 LAC AND AS SUCH THERE WAS NO BASIS TO PASS SEPARATE ORDER DISPOSING OF F SUCH OBJECTION S . ACCORDING TO THE LD. CIT(A), THE ASSESSEE TRIED TO BLOW HOT AND COLD AT THE SAME TIME JUST TO PUT THE CASE IN A LEGAL DEBATE WHICH WAS NOT ONLY UNJUSTIFIED BUT ALSO UNACCEPTABLE . A S REGARDS TO THE CONTENTION OF THE ASSESSEE THAT THE REOPENING WAS ON THE BASIS OF CHANGE OF OPINION , THE LD. CIT(A) OBSERVED THAT IT COMES TO RESCUE OF THE ASSESSEE O NLY WHEN THE AO HAS TAKEN ONE OF PERMISSIBLE VIEW S AT THE TIME OF ASSESSMENT PROCEEDINGS BUT A WRONG APPLICATION OF LAW CANNOT BE HELD AS PERMISSIBLE VIEW AND THAT CAN ALWAYS BE CHANGE D FOR APPRECIATING LAW. THE LD. CIT(A) WAS OF THE VIEW THAT THE REASSESS MENT WAS BASED ON NON - CONSIDERATION OF COPY OF BANK ACCOUNT WITH CANAR A BANK, MUZAFFARNAGAR, T HE SAID LAPSE ON THE ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 37 PART OF AO WAS CORRECTED BY TAKING REMEDIAL ACTION U/S 147 OF THE A CT, THEREFORE, THE CONTENTION OF THE ASSESSEE FOR CHANGE OF OPINION WAS AL SO REJECTED. THE LD. CIT(A) FURTHER OBSERVED THAT THE GLARING MIS - MATCH BETWEEN THE FABRICATED COPY OF BANK ACCOUNT AND THE ACTUAL COPY OF BANK ACCOUNT WAS DEFINITELY A NEW INFORMATION ON WHICH THE AO WAS DUTY BOUND TO INITIATE REASSESSMENT PROCEEDINGS , SO THERE WAS NO CHANGE OF OPINION. THE LD. CIT(A) CATEGORICALLY STATED THAT THE AO AFTER MAKING THE INQUIRY FROM CANARA BANK, MUZAFFARNAGAR , GATHERED THAT THE ASSESSEE HAD DELIBERATELY OMITTED TRANSACTIONS TO THE EXTENT OF RS. 50 LAC REGARDING WHICH THE ASSE SSEE HAD NO EXPLANATION AT ALL AND THE SURRENDER OF RS. 50 LAC WAS NEITHER MADE AT THE TIME OF ORIGINAL ASSESSMENT NOR AT THE TIME OF FILING OF RETURN U/S 148 OF THE ACT BUT ONLY WHEN THE COPY OF BANK STATEMENT AS FURNISHED BY THE AFORESAID BANK WAS CONFRO NTED TO THE ASSESSEE. THUS, SURRENDER OF INCOME WAS NOT VOLUNTARILY MADE BUT WAS MA DE AFTER DETE CTION BY THE DEPARTMENT AND AFTER T HE ASSESSEE HAD NO ESCAPE ROUTE. T HEREFORE, THE PROCEEDING OFFERED BY THE ASSESSEE WAS NOT BONAFIDE AND THE SAME WAS MADE AFT ER THE POSITIVE DETECTION BY THE DEPARTMENT. IT WAS ALSO OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THAT THE EXPLANATION OFFERED WAS BONAFIDE . ACCORDING TO THE LD. CIT(A), THE SURRENDER FROM THE ASSESSEE WAS A ME RCY PETITION FILED BEFORE THE AO ACCEPTING THE UNDISCLOSED INCOME OF RS. 50 LAC AND THE ACCEPTANCE OF CHEQUE OF RS. 10,00,000/ - TOWARDS TAXES BY THE AO SHOULD NOT BE UNDERSTOOD THAT HE AGREED FOR NON - INITIATION OF PENALTY. THE LD. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 38 CIT(A) WAS OF THE VIEW THAT IF THE DEPARTMENT HAD INCR IMINATING MATERIAL WITH REGARD TO ADDITION OF CONCEALED INCOME, DISCLOSURE WAS NOT VOLUNTARILY AND VICE VERSA AND SIMPLY BECAUSE THE ASSESSEE AGREED TO THE ADDITION OF CONCEALED INCOME AFTER DETECTION THEREOF AND SURRENDERING THE UNDISCLOSED INCOME AT THE T IME OF REASSESSMENT PROCEEDINGS, T HE ASSESSEE CANNOT ESCAPE FROM PENALTY U/S 271(1)(C) OF THE ACT. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS RAKESH SURI (ALL) 331 ITR 458 P. C. JOSEPH & BROS. VS CIT (KER) 240 ITR 818 CIT VS SUSHMA DEVI AGARWAL (ITAT, KOL - TM) 67 DTR 430 ANAND LIQUORS VS CIT (KER) 232 ITR 35 10 . THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE FAILED IN PROVING THE SOURCE OF THE AMOUNT OF RS. 50 LAC IN SPITE OF SUFFICIENT OPP ORTUNITY GIVEN , THERE WERE GLARING FALSITY AS WELL AS CONTRADICTIONS IN THE EXPLANATION FURNISHED AND THEREAFTER THE ASSESSEE HIMSELF SURRENDERED THE AMOUNT OF RS. 50,00,000/ - BUT THE SURRENDER WAS NEITHER VOLUNTARILY NOR WITH CLEAN HANDS. THE LD. CIT(A) ALSO MENTIONED THAT THE CLAIM OF THE ASSESSE E THAT AMOUNT OF RS. 10,00,000/ - WAS RECEIVED IN FAMILY SETTLEMENT MADE 40 YEARS BACK, HAD NO FORCE AND THAT THE ADVANCES TOTALING TO RS. 40,00,000/ - WERE RECEIVED IN APRIL, 2006 FOR SALE OF HOUSE AT CHARTHWAL AND MUZAFFARNAGAR WAS NOT ACCEPTABLE, SINCE THE ASSESSEE SHOWED HIS INABILITY TO DISCLOSE THE NAMES OF SUCH PERSONS ON THE GROUND THAT THERE WAS BA NDISH ON HIM. THUS, THE SOURCE OF AMOUNT OF RS. 50,00,000/ - WAS NOT COMPLETELY EXPLAINED BY THE ASSESSEE AND ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 39 FROM THE SEQUENCE OF EVENTS IT WAS INFERRE D BY THE AO THAT THE ASSESSEE DELIBERATELY CONCEALED HIS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. THEREFORE, THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT WAS JUSTIFIED. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: SHYAM BIRI WO RKS PVT. LTD. VS CIT 185 CTR 510 (ALL) RAM COMMERCIAL ENTERPRISES LTD. 246 ITR 568 (DEL) JITEN & CO. VS STO 39 STC 308 (DEL) SOM NATH OIL MILLS 214 ITR 32 (GUJ) JEEVAN LAL SHAH 205 ITR 244 (SC) A. M. SHAH & COMPANY 238 ITR 415 (GUJ) RAM SEWAK RAM CHANDRA 1 51 CTR 294 (ALL) K. N. SINGH 150 CTR 448 (MP) BALWANT RAI & CO. 274 ITR 269 (ALL) ROHINI DAIRY FARM 244 ITR 427 (MAD.) GURBACHAN LAL 250 ITR 157 (DEL) 11 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFOR E THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, T HE AO HAS TO SATISFY HIMSELF DURING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME OR H AS FURNISHED THE INACCUR ATE PARTICULARS OF INCOME BUT NO SUCH SATISFACTION HAD BEEN ARRIVED AT BY THE AO D URING THE ASSESSMENT PROCEEDINGS AND THE SATISFACTION ARRIVED AT DURING THE PENALTY PROCEEDINGS CANNOT BE SUBSTITUTED FOR THE SATISFACTION TO BE ARRIVED AT DURING THE ASSESSM ENT PROCEEDINGS. IT WAS STATED THAT THE ASSESSEE SURRENDERED RS. 50,00,000/ - HIMSELF DURING REASSESSMENT PROCEEDINGS , THE SAID SURRENDER WAS ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 40 BONAFIDE AND MADE WITH CLEAN HANDS TO AVOID ANY DISPUTE IN FUTURE, TO AVOID ANY LITIGATION AND TO PURCHASE PEACE OF MIND SUBJECT TO NO PENAL ACTION. IT WAS EMPHASIZED THAT THE ASSESSEE HANDED OVER THE CHEQUE OF RS. 10 LAC TOWARDS TAX LIABILITY , IN THE SAID SURRENDER OF RS. 50 LAC THE ASSESSEE HAD ALSO EXPLAINED THE SOURCE AS RS. 10 LAC OUT OF RS. 12 LAC RECEIVED FROM F ATHER BEFORE 40 YEARS IN PURSUANCE TO FAMILY ARRANGEMENT AND RS. 40 LAC AS ADVANCE MONEY RECEIVED FOR SALE OF TWO HOUSES ONE AT CHARTHAWAL AND ANOTHER AT MUZAFFARNAGAR. THUS, THE ASSESSEE HAD EXPLAINED THE SOURCE OF RS. 50 LAC WHICH WERE DULY ENTERED INTO BOOKS OF ACCOUNTS FOR THE RELEVANT YEAR. HOWEVER, THE AO IGNORED THE SAME BY STATING THAT THE BOOKS WERE FABRICATED. IT WAS CONTENDED THAT THE ENTRIES OF RS. 50 LAC WERE EXISTING IN THE BANK ACCOUNT OF THE ASSESSEE AND ALSO IN THE LEDGER MAINTAINED FOR THE ASSESSMENT RELEVANT YEAR AND THUS THE MATERIAL RELEVANT FOR THE ASSESSMENT WAS ALREADY BEFORE THE AO DURING THE ORIGINAL ASSESSMENT PROCEEDING AND EVEN BANK ACCOUNT SENT BY THE CANARA BANK WAS AVAILABLE TO THE AO BEFORE PASSING OF ORIGINAL ASSESSMENT ORDE R. THEREFORE, THE VERY BASIS FOR IMPOSING THE PENALTY THAT THE BANK ACCOUNT WAS NOT BEFORE THE AO ON 30.12.2009 WAS INCORRECT AND THEREFORE, THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT WAS INVALID. IT WAS STATED THAT THE AO HAD NOT ARRIVED AT A R EQUISITE SATISFACTION AND MERELY BECAUSE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED, IT CANNOT BE ASSUMED THAT SATISFACTION WAS ARRIVED AT BY TH E AO FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 41 INCOME WHICH IS THE PRE - REQUISITE FOR INITIATING PENALTY PROCEEDING. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS RAM COMMERCIAL ENTERPRISES 246 ITR 568 (DEL) D M MANASVI 86 ITR 557 (SC) S V ANGIDI CHETTIAR 44 ITR 739 (SC) MS MADHUSHREE GUPTA VS UOI 183 TAXMANN 100 (DEL) 12 . T HE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE DULY OBJECTED TO THE INITIATION OF REASSESSMENT PROCEEDINGS VIDE LETTER DATE D 21 .09.2010 AND THE AO HAD NOT MET OUT THOSE OBJECTIONS BEFORE CONTINUING THE RE ASSESSMENT PROCEEDINGS. THUS, T HE PROCEDURE ADOPTED BY THE AO WAS CONTRARY TO THE LAW LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. (2003) 259 ITR 19 . IT WAS CONTENDED THAT THE REASSESSMENT PROCEEDINGS WAS BASED ON MERE CHANGE OF OPINION, THEREFORE, THE SAME WAS NOT SUSTAINABLE IN VIEW OF THE FULL BENCH DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE KELVINATOR OF INDIA 256 ITR 1 AS CONFIRMED BY THE HON BLE SUPREME COURT IN 320 ITR 561. IT WAS STATED THAT THE INFORMATION ON THE BASIS OF WHICH REA SSESSMENT PROCEEDINGS WERE INITIATED HAD ALREADY BEEN EXISTING BEFORE THE AO DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND CONSIDERED BY HIM, THEREFORE, THE PROCEEDINGS INITIATED ON THE BASIS OF CHANGE OF OPINION WAS BAD - IN - LAW. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS USHA INTERNATIONAL LIMITED 348 ITR 485 (FB) (DEL) ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 42 S V KALYANAM VS ITO 327 ITR 477 (MAD) CIT VS MAHAVIR IRRIGATION (P) LTD. 202 TAXMANN 415 (DEL) CIT VS RAJDEV SINGH & COMPANY 202 TAXMANN 433 (DEL) 13 . IT WAS STATED THAT T HE AO ACCEPTED THE SURRENDER MADE BY THE ASSESSEE BUT HAD NOT ACCEPTED THE CONDITIONS SUBJECT TO WHICH SURRENDER WAS MADE. IT WAS FURTHER STATED THAT AS PER THE ESTABLISHED PRINCIPLE OF LAW THE ADMISSIONS HAVE TO BE READ AS A WHOLE AND IN THE CONTEXT IN WH ICH, THEY WERE MADE AND NOT DE HORS THE CONTEXT AND THE ADMISSION CANNOT BE A BASIS FOR LEAVING THE PENALTY WHEN IT IS MADE FOR PURCHASE OF PEACE WITH THE DEPARTMENT. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS PARIPUSHPAM (S.I.) 249 ITR 55 0 (MAD) CIT VS GARG TRADER 253 ITR 736 (P&H) CIT VS SURESH KUMAR BANSAL 254 ITR 130 (P&H) CIT VS JALARAM OIL MILLS 253 ITR 192 (GUJ) CIT VS PIONEER ENGINEERING SYNDICATE 188 ITR 287 (MAD) CIT VS PUNJAB TYRES 162 ITR 517 (MP) CIT VS SARAN KHANDSARI SUGAR WO RKS 246 ITR 216 (ALL) CIT MANSA RAM & SONS 106 ITR 307 (ALL) CIT VS CAREERS EDUCATION & INFOTECH (P) LTD. 336 ITR 257 (P&H) CIT VS GUJAMGADI (M.M.) 290 ITR 168 (KAR) NATIONAL TEXTILES VS CIT 249 ITR 125 (GUJ) 14 . IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS AN ILLITERATE PERSON AND DESPITE THE ADVISE OF LEGAL CONSULTANT THAT THE REASSESSMENT PROCEEDINGS IN IT I ATED BY THE AO WAS BAD - IN - LAW AS BASED ON MERE CHANG E OF OPINION, H E SURRENDERED THE AMOUNT OF RS. 50 LAC WITH CLEAN HANDS IN ORDER TO ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 43 AVOID FUTURE L ITIGATION AND ALSO TO BUY A PEACE. HE SURRENDERED THE AMOUNT SUBJECT TO NO PENAL ACTION, THEREFORE, THE PENALTY LEVIED BY THE AO AND SUSTAINED BY THE LD. CIT(A ) WA S LIABLE TO BE DELETED IN THE INTEREST OF JUSTICE. THE RELIANCE WAS PLACED ON THE FOLLOWING C ASE LAWS: CIT VS VATIKA CONSTRUCTION PVT. LTD. (ITA NO. 1246/2010 DECIDED ON 11.10.2012)(DEL) CIT VS ASHOK TAKER (2008) 170 TAXMANN 471 (DEL) CIT - I VS D&H SECHERON ELECTRODES LTD. (2006) 157 TAXMANN 463 (MP) CIT VS KM SONALI JAIN (2012) 211 TAXMANN 175 (A LL) (MAG) ITO VS RAKESH KUMAR GUPTA (2012) 21 TAXMANN.COM 323 (DEL) CIT VS SARAN KHANDSARI SUGAR WORKS 246 ITR 216 (ALL) CIT VS MANSA RAM & SONS 106 ITR 307 (ALL) 15 . IN HIS RIVAL SUBMISSIONS THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AUTHORITIES BELO W AND FURTHER SUBMITTED THAT THE SURRENDER MADE BY THE ASSESSEE WAS NOT VOLUNTARILY BECAUSE HE WAS COMPELLED TO MAKE THE SURRENDER AS THERE WAS NO ESCAPE. IT WAS FURTHER SUBMITTED THAT AS PER CLAUSE (1B) TO EXPLANATION 7 OF SUB - SECTION 1 TO SECTION 271 OF THE ACT , THE RECORDING OF SATISFACTION IS NOT NECESSARY WHERE ANY AMOUNT IS ADDED FOR DISALLOWANCE IN CO MPUTING THE TOTAL INCOME OR LOSS OF THE ASSESSEE IN ANY ORDER OF THE ASSE SSMENT OR REASSESSMENT AND SAID ORDER CONTENDS A DIRECTION FOR INITIATION OF PE NALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB - SECTION (1) SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE AO FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE CLAUSE (C) OF SECTION 271 (1) OF THE ACT. IT WAS ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 44 FURT HER SUBMITTED THAT SINCE THE AO INITIATED THE PENALTY PROCEEDINGS AFTER MAKING THE ADDITION, THEREFORE, THE P ENALTY U/S 271(1)(C) OF THE ACT, I N VIEW OF EXPLANATION 7 TO SUB - SECTION (1) OF SECTION 271 OF THE ACT WAS RIGHTLY LEVIED BY THE AO AND THE LD. CIT (A) WAS JUSTIFIED IN UPHOLDING THE SAME. 16 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT IN THE ORIGINAL ASSESSMENT PR OCEEDINGS U /S 143(3) OF THE ACT, T HE AO HAD MADE AN ADDITION OF RS. 7,000 ONLY, HOWEVER THE CASE WAS REOPENED ON THE BASIS THAT THE ASSESSEE DEPOSIT ED OF RS. 50 LAC IN HIS BANK ACCOUNT . D URING THE COURSE OF AS SESSMENT PROCEEDINGS, T HE ASSESSEE EXPLAINED THE SOURCE OF THE DEPOSIT WHICH WAS RS. 10 LAC CLAIMED TO HAVE BEEN RECEIVED FROM HIS FATHER DURING FAMILY ARRANGEMENTS AND RS. 40 LAC ON ACCOUNT OF ADVANCE MONEY RECEIVED IN APRIL 2006 FOR SALE OF TWO HOUSES. HOWEVER, THE ASSESSEE DURING THE COU RSE OF ASSESSMENT PROCE EDINGS AGREED FOR ADDITION OF RS. 50 LAC IN SPITE OF THE FACT THAT THE AMOUNT WAS RECORDED IN HIS BOOKS OF ACCOUNTS, THE SAID SURRENDER WAS MADE TO BUY PEACE OF MIND AND TO AVOID LITIGATION AND SUBJECT TO NO PENALTY U/S 271(1)(C) OF THE ACT. IN THE PRESENT CASE, THE AO ALSO MADE ANOTHER ADDITION OF RS. 7,13,535/ - ON ACCOUNT OF UNEXPLAINED EXPENDITURE BUT THE SAME WAS DELETED BY THE LD. CIT(A) AND THE DEPARTMENT HAS NOT PREFERRED ANY APPEAL FOR THE SAID DELETION. THE AO LEVIED THE PENALTY OF RS. 16,88,730/ - U/S 271(1)(C) OF ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 45 THE ACT BY CONSIDERING THE SURRENDERED AMOUNT OF RS. 50 LAC AS A CONCEALED INCOME OF THE ASSESSEE. IT IS W ELL SETTLED THAT ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE TWO SEPARATE AND DISTINCT PROCEEDINGS AND EVEN WHEN SOME ADDI TION IS MADE IT DOES NOT IP SO FACTO ABSOLVE THE REVENUE OF ITS BURDEN OF PROVING THAT THE AM OUNT ADDED WAS CONCEALED INCOME OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT FOR LEVYING THE P ENALTY U/S 271(1)(C) OF THE ACT, T HE SATISFACTION OF THE AO IS NECESSARY TO ESTABLISH THAT THE ASSESSEE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE PRESENT CASE, THE AO SIMPLY ISSUED THE NOTICE U/S 271(1)(C) OF THE ACT, HOWEVER, NOWHERE RECORDED HIS SATISFACTION AS TO WHETHER THE ASSESSEE CON CEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. HE MADE A GENERAL REMARK THAT IF ALL THE CIRCUMSTANCES WERE TAKEN TOGETHER IT LEAD TO THE IRRESISTIBLE INFERENCE THAT THE ASSESSEE HAD CONCEALED THE INCOME BY FURNISHING INACCURATE PARTICULAR S OF HIS INCOME. HOWEVER, THERE IS NO POSITIVE SATISFACTION THAT THE ASSESSEE CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. 17. ON A SIMILAR ISSUE THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MADHUSHREE GUPTA VS UOI 183 TAXMANN 100 (SUPRA) HELD AS UNDER: '15.6 - AS INDICATED HEREINABOVE THE POSITION IS NO DIFFERENT POST - AMENDMENT. THE CONTRA SUBMISSION OF THE LD. ASG THAT PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER NEED NOT BE ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 46 REFLECTED AT THE STAGE OF INITIATION BUT O NLY AT THE STAGE OF IMPOSITION OF PENALTY IS IN THE TEETH OF SECTION 271(1)(C) OF THE ACT. SECTION 271(1)(C) HAS TO BE READ IN CONSONANCE OF SECTION 271(1B). THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITIATION OF PENALTY PROCEEDING WAS AND REMAINS A JU RISDICTIONAL FACT WHICH CANNOT BE WHISKED AWAY AS THE PROVISIONS STANDS EVEN TODAY, I.E., POST AMENDMENT. IF AN INTERPRETATION SUCH AS THE ONE PROPOSED BY THE REVENUE FOR SECTION 271(1B) IS ACCEPTED THEN, IN OUR VIEW, THE IMPUGNED PROVISION (SECTION 271(1B )) WILL FALL FOUL OF ARTICLE 14 OF THE CONSTITUTION AS IT WILL THEN BE IMPREGNATED WITH THE VICE OF ARBITRARINESS. THE ASSESSING OFFICER WOULD IN SUCH A SITUATION BE IN A POSITION TO PICK A CASE FOR INITIATION OF PENALTY MERELY BECAUSE THERE IS AN ADDITION OR DISALLOWANCE WITHOUT ARRIVING AT A PRIMA FACIE SATISFACTION WITH RESPECT TO INFRACTION BY THE ASSESSEE OF CLAUSE (C) OF SUB - SECTION (1) OF SECTION 271 OF THE ACT. A REQUIREMENT, WHICH IS MANDATED BY THE PROVISION ITSELF'. 18. SIMILARLY THE HON BLE DE LHI HIGH COURT IN THE CASE OF CIT VS RAM COMMERCIAL ENTERPRISES LTD. 246 ITR 568 (SUPRA) HELD AS UNDER: THE SATISFACTION AS TO THE ASSESSEE HAVING CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME IS TO BE ARRIVED AT BY THE ASSESSING OFFICER DURING THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, WHICH WOULD MEAN THE ASSESSMENT PROCEEDINGS, WITHOUT WHICH, THE VERY JURISDICTION TO INITIATE THE PENALTY PROCEEDINGS IS NOT CONFERRED ON THE ASSESSING AUTHORITY BY REFERENCE TO CLAUSE (C) OF SUB - SECTION (1) OF SECTION 271 OF THE INCOME TAX ACT, 1961. A BARE READING OF THE PROVISIONS OF SECTION 271 AND THE LAW LAID DOWN BY THE SUPREME COURT MAKES IT CLEAR THAT, IT IS THE ASSESSING AUTHORITY WHO HAS TO FORM HIS OWN OPINION AND RECORD HIS SATISFACTION BEFORE INITIATING THE PENALTY PROCEEDINGS. MERELY BECAUSE THE PENALTY PROCEEDINGS HAVE ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 47 BEEN INITIATED IT CANNOT BE ASSUMED THAT SUCH A SATISFACTION WAS ARRIVED AT. 19. IN THE PRESENT CASE ALSO THE AO WHILE FRAMING THE ASSESSMENT U /S 143(3) R.W.S 147 OF THE ACT NOWHERE RECORDED THE SATISFACTION THAT THE ASSESSEE EITHER CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. HE SIMPLY STATED THAT THE PENALTY NOTICE U/S 271(1)(C) OF THE ACT WAS BEING ISSUED SEPARATELY, THE REFORE, IN VIEW OF THE RATIO LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASES THE PENALTY U/S 271(1)(C) OF THE ACT WAS NOT LEVIABLE. IN THE PRESENT CASE, THE AO HAD NOT ARRIVED AT A REQUISITE SATISFACTION DU RING THE ASS ESSMENT PROCEEDINGS, H E SIMPLY INITIATED THE PENALTY PROCEEDINGS WITHOUT OBSERVING AS TO WHETHER IT WAS A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF I NACCURATE PARTICULARS OF INCOME, M OREOVER, WHEN THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) OF THE A CT, COPY OF BANK ACCOUNT ISSUED BY CANARA BANK WAS AVAILABLE TO THE AO WHICH HE LATER ON HAD CONSIDERED AS FABRICATED. HOWEVER, DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDIN GS THE SAME WAS ACCEPTED AND NO FAUL T WAS FOUND IN THE SAID ACCOUNT, E VEN WHEN ASSESSMENT W AS FRAMED U/S 143(3) OF THE ACT. H OWEVER, LETTER ON THE CASE WAS REOPENED U/S 147 OF THE ACT BY ISSUING THE NOTICE U/S 148 OF THE ACT AND THE AO INQUIRED ABOUT THE SOURCE OF RS. 50 LAC WHICH WAS ENTERED IN THE BO OKS OF ACCOUNTS BY THE ASSESSEE , T HE SOURCE OF THE SAID AMOUNT WAS EXPLAINED AS ADVANCE MONEY AMOUNTING TO RS. 40 LAC RECEIVED ON ACCOUNT OF SALE OF TWO HOUSES AT ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 48 CHA RTHAWAL A ND MUZAFFARNAGAR. THE ANOTHER AMOUNT OF RS. 10 LAC WAS CLAIMED TO HAVE BEEN RECEIVED FROM THE FATHER DURING THE FAMILY ARRANGEMENTS IN THE EARLIER YEARS , BUT THE ASSESSEE WAS UNABLE TO PRODUCE THE PA RTIES FROM WHOM THE ADVANCES WERE RECEIVED. HE , THEREFORE, SURRENDERED THE AMOUNT OF RS. 50 LAC VOLUNTARILY AND PAID THE TAX ON THE SAID SURRENDER ED AMOUNT SUBJECT TO NO PENAL ACTION. IN THE INSTANT CASE THE ASSESSEE HIMSELF AGREED FOR SURRENDER , SO IT WAS A GOOD CASE TO MAKE THE ADDITION, HOWEVER THE SAID SURRENDER ITSELF CANNOT BE CONSIDERED AS A CONCEALMENT OF PARTICULARS OF INCOME BECAUSE ALL THE RELEVANT INFORMATION WERE ALREADY AVAILABLE WITH THE AO WHO FRAMED THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT , IT CAN ALSO NOT BE SAID TO BE A CASE OF CONCEALMENT OF INCOME BECAUSE THE AO IN THE BODY OF ASSESSMENT ORDER HAS NOT STATED THAT IT WAS A CONCEALED INCOME OF THE A SSESSEE OR THE INCOME FOR WHICH INACCURATE PARTICULARS WERE FURNISHED BY THE ASSESSEE. 20. ON A SIMILAR ISSUE THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS M. M. GUJAMGADI 290 ITR 168 (SUPRA) HELD AS UNDER: A READING OF SECTIONS 271 AND 271(1)( C) OF THE INCOME TAX ACT, 1961, AND THE EXPLANATION APPENDED THERETO MANIFESTLY MAKES IT CLEAR THAT EVERY ADDITION OF INCOME BY THE INCOME - TAX OFFICER WILL NOT AUTOMATICALLY ATTRACT LEVY OF PENALTY. IT IS CLEAR FROM EXPLANATION 1(B) TO SECTION 271(1)(C) OF THE ACT THAT WHILE COMPUTING THE TOTAL INCOME OF AN ASSESSEE, IF THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE THEN THERE WILL BE A DEEMED CONCEALMENT BY THE ASSESSEE. ITA NOS. 4994 /DEL /2013 MOHD. IRSHAD 49 IT HAS BEEN FURTHER HELD AS UNDER: THE EXPLANATION OFFERED BY THE AS SESSEE WAS AVAILABLE ON RECORD. BONA FIDE FAILURE ON THE PART OF THE ASSESSEE IN NOT SUBSTANTIATING HIS CLAIM WAS ALSO AVAILABLE ON RECORD. THE INCOME - TAX OFFICER, WHILE PASSING THE ORDER OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, HAD NOT CONSIDERED TH E AVAILABLE EXPLANATION OF THE ASSESSEE AND WHETHER THE EXPLANATION SO OFFERED WAS BONAFIDE OR NOT. THE CONCELLATION OF PENALTY WAS JUSTIFIED. 21. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE ARE OF THE VIEW THAT THE PENA LTY U/S 271(1)(C) OF THE ACT WAS NOT LEVIABLE IN THE PRESENT CASE. A CCORDINGL Y, THE PENALTY CONFIRMED BY THE LD. CIT(A) WHICH WAS LEVIED BY THE AO U/S 271(1)(C) OF THE ACT IS DELETED . 22 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ( ORDER PRON OUNCED IN THE COURT ON 22 /06 /2015 ) SD/ - SD / - (G. C. GUPTA ) (N. K. SAINI) VICE PRESIDENT ACCOUNTANT MEMBER D ATED: 22 /06 /2015 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR
Other Referred Cases
-
Laws Referred To
-
1:1 Consultation on Startup Fundraising
₹5000
1:1 Consultation on FEMA Compliance
₹1
360 Brand Audit (30 mins)
₹299
CRM Implementation Plan
₹0
Non-Compete Agreement
₹0
Finance Bill, 2026: Key GST Reforms that will Reshape Compliance and Cash Flows
Team Counselvise - February 03, 2026
Residency Rules: Income Tax Act, 1961 vs Income Tax Bill, 2025 — A Subtle Yet Significant Shift!
Team Counselvise - February 18, 2026
Budget 2026: 5 Major Personal Tax Changes Every Taxpayer Must Know
Team Counselvise - February 05, 2026