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2011 (11) TMI 658

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..... de only on the basis of surrender made by the assessee and not with reference 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 the contention of the assessee that the levy of penalty is untenable no finding has been given on merit regarding 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 the contention of the appellant that the order passed by the AO levying penalty is untenable in the eye of law as no satisfaction, as required under the law, has been recorded by the AO in the assessment order. 2. The facts are that the assessee company is engaged 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 case of Marketing Se .....

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..... company as share application money; that the additional fund flow to the extent of ₹ 56,49,000/-, i.e., the difference between ₹ 2,39,00,000/- and ₹ 1,82,51,000/-, which remained unexplained was, at that stage, being offered for taxation by the company as its income from other 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 prosecution. 5. Later, the assessee filed a petition u/s 144 A of 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 assessee company showed its willingness to be taxed of ₹ 56,49,000/-, as the company s 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 asked 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 communicati .....

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..... rtner 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 in the hands of the firm; that it had also been explained that since the funds to the extent of ₹ 1,82,51,000/- stood already inducted in the books of the company as share application money before it was offered to tax in the 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. Marketing Services; that in the said facts and circumstances of the case and in view of the fact that no adverse inference was possible to be drawn against the assessee company against the induction of share application 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 not be taxed again in the hands of the recipient; that the AO was, as such, being requested to accept the assessee s explanation regarding .....

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..... e assessee s case clearly established that the offer of surrender followed investigation made by the AO regarding share application money received by the assessee; that no case had been made out that 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 assessee s contention 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; that the ld. CIT(A) has failed to take into consideration the fact that the additions had been made only on the basis of surrender made by the assessee, without any reference to any documentary evidence; that the ld. CIT(A) has further failed to consider the assessee s contention that no finding having been recorded on merit regarding concealment in the penalty order, the l .....

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..... he case of Marketing Services, the facts in both the cases are entirely different; that therein income was revised voluntarily, after the survey was carried out, which is not the case herein; 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 documents. 15. We have heard the parties and have perused the material on record. This material on record shows that the offer of surrender was only to settle the dispute and that while doing so, the assessee did not admit any concealment income. This is evident from the assessee s letter dated 22.11.06 (APB 1 to 3). Therein, it has been stated, inter alia, as follows:- The company with a view to avoid litigation and buy peace and to channelise the energy and resources towards productive work and to make amicable settlement with the Income Tax Department offered to surrender a sum of ₹ 56,49,000/- as income from other sources. 16. The said amount of ₹ 56,49,000/- subsequen .....

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..... ut its correctness. He should also ensure that the assessee has paid the taxes along with interest on the additional surrendered 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 additional surrendered amount should not be treated as concealed income and giving further direction to the AO regarding non-initiation of penalty prosecution proceedings. I decline to give any direction to the AO in this regard as the assessee company itself has treated the balance amount of share application money as its unexplained money and offering it for tax. Moreover, no such direction in my opinion for non initiation of penalty proceedings can be issued to the AO as before initiating penalty proceedings, he has to satisfy himself and come to a definite conclusion that whether the assessee company has concealed the particulars of income or filed inaccurate particulars of income. All the powers regarding initiation of penalty proceedings 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 initiation of penalty proceedings. As regard in .....

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..... he assessee had not surrendered at all and that he had done so on the persistent queries made 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 income made by the assessee in his revised returns and his explanation that he had done so to buy peace with the Department and to come out of vexed litigation could be treated as bona fide in the facts and circumstances of the case. 24. CIT v. Suresh Chandra Mittal , 241 ITR 124(MP) (supra), has been affirmed by the Hon ble Supreme Court in CIT v. Suresh Chandra Mittal , 251 ITR 9(SC)(supra). 25. In Chikkam Subharao v. C.S. Rao, AIR 1971 SC 1542, it has been held that before penalty can be levied, the implication 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 has been held to the effect that the mere fact that the assessee has agreed to higher income is not a proof of admission of concealment by the ass .....

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