TMI Blog1994 (10) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... during survey operations. Statement of the Director of the company had also been recorded after the survey. On 9-12-1987, assessee filed a revised return declaring income of Rs. 15,66,620 which included income of Rs. 15,50,000 as income from other sources. Assessing Officer, during the course of assessment proceedings, which were taken up after the filing of a revised return, asked the assessee to explain the source of accretion in the share capital of Rs. 24,50,000. Assessee explained the sources as under :--- (a) Rs. 15,50,000 shown as income from other sources in the revised return. (b) Rs. 9,00,000 Amount shown from individual shareholders as their investment under Voluntary Disclosure Scheme. --------------------------- Total Rs. 24,50,000 --------------------------- Out of Rs. 9,00,000 assessee could furnish proof of disclosure in respect of Rs. 8,99,000 only. The difference of Rs. 1,000 was thus added by the Assessing Officer as income from undisclosed sources. The sum of Rs. 15,50,000 was also assessed as income from other sources as declared by the assessee. Assessment was made vide order dated 17-2-1988 at an income of Rs. 15,72,400. In the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfined his attack towards the legality of the penalty order. Shri Sharma contended that the Assessing Officer, during the course of assessment proceedings, should be satisfied about the assessee having concealed the income or of furnishing inaccurate particulars of income and it is well-settled that he should record his satisfaction for the initiation of the proceedings. In this connection, reliance has been placed on the decision of the Supreme Court in the case of D.M. Manasvi v. CIT [1972] 86 ITR 557. Taking us through the entire assessment order passed by the Assessing Officer for the relevant assessment year, Shri Sharma contended that there is not even a whisper about the assessee having concealed the income relating to the sum of Rs. 15,50,000 offered for taxation in the revised return. A perusal of the assessment order, according to Shri Sharma, reveals that the Assessing Officer had initiated penalty proceedings with reference to the sum of Rs. 1,000 only and not with reference to the sum of Rs. 15,50,000. The Assessing Officer has also not made any reference to the survey operations or any material found during the course of such operations regarding increase in share ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arma clarified that income of Rs. 15,50,000 was not offered under section 68 of the Act as unexplained investment out of share capital but the said amount was disclosed as income from other sources. The source of increase in the share capital was explained out of the said income. Shri Sharma further contended that a sum of Rs. 1,000 alone could be said to have been added under section 68 as assessee had failed to explain the source to that extent. At best, according to Shri Sharma, penalty relating to the sum of Rs. 1,000 alone can be sustained. 6. Shri Goyel, the learned Departmental Representative, on the other hand, contended that the assessee is making the claim of lack of jurisdiction for the first time before the Tribunal. This claim had not been made before the Assessing Officer or before the first appellate authority. Shri Goyel further contended that Assessing Officer was satisfied during the course of assessment proceedings that assessee had concealed the income to the tune of Rs. 15,50,000. It was further contended that though satisfaction of the Assessing Officer during the course of assessment proceedings is a condition precedent for imposition of penalty, yet it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w regarding the satisfaction of the Assessing Officer during the course of assessment proceedings is well-settled. It has to be seen as to whether there was a visible satisfaction and in this connection, the assessment order is the best proof either in favour of the revenue or against it. Shri Sharma contended that satisfaction cannot be inferred but it has to be visible as it is the foundation for imposition of penalty for concealment of income. The learned counsel further contended that in this connection the text of the assessment order is very important. The income of Rs. 15,50,000 has been assessed as income from other sources. The same had not been added as income from undisclosed sources under section 68 on account of the increase in share capital for which no explanation would have been furnished by the assessee. Shri Sharma contended that the office note written by the Assessing Officer also clearly supports the contention of the assessee that Assessing Officer was satisfied during the course of assessment proceedings that penalty in regard to the sum of Rs. 15,50, 000 was not attracted. Shri Sharma further contended that the material referred to by the learned Departmenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee nor was the assessee confronted before the filing of the revised return on 9-12-1987 about any discrepancy. Assessee filed the revised return along with a letter stating that the sum of Rs. 15,50,000 was being offered to tax in order to buy peace. During the course of assessment proceedings after the filing of the revised return the Assessing Officer made enquiries about the increase in share capital of Rs. 24,50,000. Assessee had explained the increase in share capital as under :--- (a) Income from other sources as disclosed in the revised return Rs. 15,50,000 (b) Amount shown by individual shareholders as their investment under Voluntary Disclosure Scheme Rs. 9,00,000 -------------------------- Total Rs. 24,50,000 -------------------------- The Assessing Officer did not question the additional income disclosed by the assessee as income from other sources of Rs. 15,50,000. However, enquiry was made with regard to investment of Rs. 9,00,000 out of which Rs. 8,99,000 was accepted as explained and the balance of Rs. 1,000 added as income from undisclosed sources presumably under section 68. The Assessing Officer completed the assessment vide order dated 17-2- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taxable income or he is concealing income." 10. In column No. 8 of the said report, to which our attention was drawn by the learned Departmental Representative, Assessing Officer has indicated that the difference between the declared income constitutes concealment and in Column No. 10, the Assessing Officer has mentioned that material was detected by the Assessing Officer during survey operations. This report is undated but it is not disputed before us that this is much after the framing of the assessment in the assessee's own case. Letter dated 18th March, 1988 is also after the making of the assessment order. Moreover, this letter also does not show that the Assessing Officer was satisfied that assessee had concealed the income and was liable to penalty in regard to sum of Rs. 15,50,000. Moreover, we find merit in the contention raised on behalf of the assessee that for the purposes of gathering as to whether Assessing Officer was satisfied about the assessee having concealed the income during the course of assessment proceedings or not, it is necessary to consider the material as was available before the date of assessment and the subsequent material has got to be ignored f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. Having gone through the assessment order and the office note therein, and the record that existed up to the date of assessment order, we are of the firm view that the satisfaction of the Assessing Officer regarding assessee being liable to penalty in regard to the sum of Rs. 15,50,000 is not visible.On the contrary it is clear to us that Assessing Officer, whether rightly or wrongly is a different matter, had been satisfied that assessee was not liable to penalty In regard to sum of Rs. 15,50,000. The reference in the assessment order regarding initiation of penalty proceedings is clearly with regard to the concealment of income to the tune of Rs. 1,000, which has remained unexplained out of Rs. 9,00,000. The order sheet entry and other records referred to by the learned Departmental Representative do not, in any way, demonstrate that Assessing Officer was satisfied during the course of assessment proceedings that assessee was liable to penalty in regard to the sum of Rs. 15,50,000. It is a different matter that after the completion of the assessment, the Assessing Officer has held the assessee to be liable to penalty for concealment. That for purposes of issue in hand, is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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