TMI Blog1993 (9) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee. Later on, the assessee revised return of income on5-11-1983wherein he withdrew the claim for deduction under section 35CCA/80GGA mentioning that "it has come to their notice that the person who had collected the donation on behalf of theMissiondid not give the money so collected to the mission. The matter is under investigation. In the meanwhile, however, they are filing the revised return to exclude deduction for a sum of Rs. 5 lakhs claimed in the original return under section 35CCA/80GGA". The assessee in original return had declared share of profit 67% from Varun Enterprises at Rs. 9,11,399 and also appended below a note mentioning :--- "The share of profit has provisionally been added at Rs. 9,11,399 in the return of income. If, however, there is any change on completion of the firm's assessment, the same will be revised." In the revised return the assessee declared its share of profit from Varun Enterprises at Rs. 12,80,312 with the following note :--- "share of profit from Varun Enterprises has been adopted as per statement annexed." Before the revised return was filed, the assessee had paid additional self assessment tax on withdrawing the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Rs. 2 lakhs respectively. They have been issued by Shri Deepak Singh. These cheques have been simply crossed in order to facilitate the diversion of the amount of cheque from Ramakrishna Vivekananda Mission to Manav Sewa Charitable Foundation. Someone signed as Murli Mohan as Manager for Ramakrishna Vivekananda Mission and this endorsement was confirmed by one Shri Vipin Mehra. The bank account of Manav Sewa Charitable Foundation was operated by Shri Vipin Mehra and Shri Prem Prakash Verma. It was further observed that Shri Vipin Mehra had no authority to collect donation on behalf of theMissionand that authority was given to Shri Vipin Mehra only on19-12-1982. The amounts collected earlier to the date of authorisation did not reach theMission. This was all the part of a scheme hatched to defraud the revenue. In this connection, reference was made to the statement of Shri Prem Prakash to whom the assessee claims to have handed over the cheques and it was observed that Shri Vipin Mehra was never authorised by theMissionto collect donation prior to19-12-1982. Reference to a conspiracy by the assessee with Shri Prem Prakash, Shri P.P. Verma and Shri Vipin Mehra, was also made and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conspiracy shows that they planned to avoid payment of tax through mala fide claims and that is how they tried to fabricate evidence for the same. 3. Regarding difference in income from Varun Enterprises as declared in the original return and as declared in the revised return, the Assessing Officer attributed this to mala fide claim made in the accounts of the firm for the reasons given in para 8 of his order. Thus he concluded that the assessee a partner with 67 per cent share in the profits of the firm and was actively engaged in the day-to-day working of the firm. Therefore, the assessee is equally guilty of deliberately concealing the true share of his income from Varun Enterprises. Therefore, the Assessing Officer held the assessee guilty of concealment in furnishing the particulars of his income. So he levied penalty in view of Explanation 1 to section 271(1)(c) of the Income-tax Act and imposed the penalty at the maximum rate of 2 per cent of the tax sought to be evaded. 4. When the matter came before the CIT (Appeals), the CIT (Appeals) basically on the same reasons, confirmed the levy of penalty. The assessee is aggrieved against that order. 5. The learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Appellate Tribunal in IT Appeal No. 5290/Del/1988, dated28-8-1992, the Tribunal has decided the issue in favour of Inalsa Ltd. Further it was submitted that a survey on an assessee dose not amount to discovery of concealed income by the department. He referred to the decision of Delhi High Court in the case of A.N. Sarvaria v. CWT [1986] 158 ITR 803. He further stated that in the case of assessee the facts are much better than the case cited above. In that case the survey was on assessee but in assessee's case the survey was on a different assessee i.e., Inalsa Ltd. in which the karta of the assessee is associated as a working director. The learned counsel invited our attention to the word "any proceedings" appearing in section 271(1)(c) and submitted that "any proceedings" does not mean proceedings relating to other assessee or proceedings relating to same assessee but for the different year. The satisfaction of the ITO must be arrived at in the course of proceedings relating to the assessee himself. Reliance in this connection, was placed on the decision of Allahabad High Court in the case of CIT v. Gopal Krishna Singhania [1973] 89 ITR 27 (FB). It was submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee came to know about the fate of donations made by him to the effect that it had been misappropriated, which ended up with filing of a revised return by the assessee on 5-11-1983. (Paper Book pp. 108 to 118, filed by the assessee). Particular attention was drawn to the affidavit of Shri Vipin Mehra (pp. 120 121), wherein he has clearly accepted to have misappropriated funds as an authorised agent of the Ramakrishna Vivekananda Mission. Our attention was also drawn towards recovering letter through which money was ultimately refunded by Shri Vipin Mehra by way of bank draft to the assessee on23-11-1983. Our attention was also invited to the fact that the assessee had acted in good faith and the money in question had reached the agent of the Trust namely, Shri Vipin Mehra, which fact had not been refuted by the agent Shri Vipin Mehra or by the institution, the transaction of donation was complete. Shri Vipin Mehra made serious charges on the assessee by way of sending a letter to the assessee on25-10-1983but later on in his affidavit dated9-11-1983, he withdrew his allegations and agreed to refund the money to assessee which he ultimately refunded on23-11-1983. In these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not figure in any of these groups nor had he even a single share holding nor was he a director in any of the companies known and run by DCM Limited or its holding company Madan Mohan Lal Shriram Limited. The counsel further submitted that in any case, for detection, the survey enquiry has to be on the assessee for that specific donation and a general enquiry would not lead to detection by the department of the assessee's donation as erroneous donation. (c) The third factor taken into account were statements of S/Shri P.P. Verma and Vipin Mehra recorded during searches. These statements were recorded behind the back of the assessee and no opportunity of cross-examination was afforded to the assessee. These statements contained nothing against the assessee. Reliance was placed on the decisions of the Supreme Court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713 and of Delhi High Court in the case of Sona Electric Co. v. CIT [1985] 152 ITR 507. (d) Bench has taken into consideration the fact that two partners of the assessee-firm were directors of INALSA Limited. This fact is of no consequence at all as nothing turns on the limited enquiry on Inalsa Ltd. (e) Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct of the assessee on knowing that the donation had not reached the donee was suspicion. However, in the present case, the assessee had taken all steps to enquire about the donation. Secondly, he made all out efforts to realise the amount and in fact a sum of Rs. 4.75 lakhs was realised. Further criminal complaints were filed by the various institutions and no further gain would have occurred to the assessee in case the assessee had filed one more complaint. The judicial system does not require multiplicity of complaints. Regarding not writing to the Ramakrishna Vivekananda Mission at the first instance, it was pointed out that no purpose would have served by writing to theMissionas the assessee came to know by correspondence with S/Shri Prem Prakash and Vipin Mehra that the amount did not reach the Institution. Further complaint was not lodged because various institutions have already filed reports and the matter was pending. So far as the contention that no donation had been made by the assessee either before or subsequent to the said donation is concerned, it was pointed out that due to change in law of section 35CCA and section 35(2A), 100% deduction or weighted deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of theMissionas early as in September 1982 whereas the departmental stand was that he was authorised on19-12-1982. This fact should be viewed from the conduct that even after publication of notice, an open appeal was given to Shri Vipin Mehra in September 1982 which is confirmed by letter issued in February 1989. Referring to two volumes of the Paper Book filed by the department, the learned counsel submitted that the papers are being filed and relied on for the first time before the Appellate Tribunal. None of such papers was submitted or given to the assessee at any stage. In this connection, our attention was invited to the certificate on the Paper Books of the department and it was submitted that these papers cannot be admitted. It was also pointed out that the observation of the department to the effect that donation amounts of the assessee were utilised initially to purchase draft in favour of Delta Overseas Pvt. Ltd., a company in which assessee through its karta is in control, was mere a try to link these two transactions. However, these cheques of donation made by the assessee were cleared much after the date of draft dated4-12-1982i.e., Rs. 3 lakhs on6-12-1982and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee wherein no document, cash or jewellery was found as unexplained, next action came from the department by way of initiation of regular assessment in October 1985. Further reliance was placed on the Board's Circular No. 491 (F. No. 225/86/85) IT (A-II) dated15-11-1985). As per clarification in that circular vide its question No. 19 and answer thereto, as to where the department could be said to have detected concealment, if at all it was there, it has been clarified in that Circular that if the ITO had only prima facie belief that would not mean that concealment had been detected. It was pointed out that the ITO in his order dated30-1-1986mentioned that he has prima facie belief that the assessee has concealed the income. In these circumstances, there is no question of department having detected any concealment prior to5-11-1983when the return was revised. Ultimately, it was submitted that penalty under section 271(1)(c) is not leviable. 11. As against this, the learned Departmental Representative Shri Sandeep Tandon very vehemently argued that penalty is exigible. The department filed two volumes of Paper Book and after the assessee's counsel completed his arguments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prem Prakash, Vipin Mehra, P.P. Verma and the assessee. The stand of the assessee that he did not know Vipin Mehra earlier and that Prem Prakash introduced him to the assessee and that the assessee came to know about the involvement of Shri Vipin Mehra only in 1983 is totally misplaced. It was submitted that there is an inter-connection between the donor and the donee. It was also pointed out that Shri Vipin Mehra had been varying his stand from case to case and even in the same case from time to time. In this circumstance, statement of Shri Vipin Mehra cannot have much evidentiary value. It was also submitted that Meghdoot Enterprises is a holding company of Inalsa (P.) Ltd. Shri Deepak Singh is a President of Inalsa (P.) Ltd. In Meghdoot Enterprises Shri Prem Prakash is a Director and Shri Deepak Singh is the Managing Director. Another company is Pushpam Investment Co. run by wife of the assessee in which Shri P.P. Verma is a director. Therefore, all these companies are inter-connected and they have been making similar type of donations in order to take benefit of section 35CCA. 12. With regard to revised return filed by the assessee on5-11-1983, the learned departmental repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal Representative submitted that all the letters written are bogus, created, made up and self-serving. However, he stated that Registered letter dated 20-10-1983 by assessee to Shri Vipin Mehra and Shri Vipin Mehra's reply to assessee dated 25-10-1983 are not bogus. Relying on the letter dated25-10-1983of Shri Vipin Mehra in which Shri Mehra had put the entire blame on Shri Deepak Singh, the learned Departmental Representative submitted that although the assessee threatened Shri Mehra that legal action would be taken against him but it did never do so. The correspondence taken place amongst various people who are sitting in the same office on same floor, is also quite unnatural. All such correspondence has been created to absolve the assessee. It was also pointed out that there was no further donation by the assessee to Ramakrishna Vivekananda Mission. The Departmental Representative tried to prove that the assessee had not made any donations ever to Non-DCM Group Trusts by producing Chart of donations by DCM Group from 1982-83 onwards. Referring to assessee's Paper Book p. 30, it was submitted that although Ramakrishna Vivekananda Mission sought donations from the assessee after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Radhey Shyam [1980] 123 ITR 125 (All.); and (2) CIT v. J.K.A. Subramania Chettiar [1977] 110 ITR 602 (Mad.). He submitted that penalty is imposable even in the case of partner where penalty has been imposed on the firm as held by the Madhya Pradesh High Court in the cases of Amritlal Somabhai v. CIT [1979] 116 ITR 833 and Ramlal Agarwal v. CIT [1982] 134 ITR 342. On the point of detection by the department, reliance was placed on the decision of Allahabad High Court in the case of Mool Chand Mahesh Chand v. CIT [1978] 115 ITR 1. 16. We have considered the rival submissions. Before we deal with the merit of the case, we would like to mention here that the department tried to produce evidence as Paper Book No. 2 on the date of hearing. Appended below this Paper Book (pp. 1 to 184), is a certificate given by Sr. A.R. Smt. Surbhi Sinha which read as under : "Certified that the above papers are from the records of the department in the Charat Ram Group of cases except charts which are based on the analysis of case records." From this certificate it is clear that these documents and evidence do not form part of the assessee's assessment record. The learned counsel for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fide intention to make a genuine donation to an approved trust under provisions of Income-tax Act. This intention was clearly stated and disclosed to the Department in the estimate of advance tax filed by the assessee and in the original return of income filed on30-6-1983. Till that time, there was no evidence on record to show that the assessee did not intend to make a bona fide donation to a genuine and approved trust. 19. The second issue is whether the assessee was conspiring with Shri Vipin Mehra and Shri P.P. Verma in deliberately making false/bogus donations. There is ample evidence on record to show that Shri Vipin Mehra and Shri P.P. Verma actually diverted the donations made by the assessee illegally. However, there is no evidence on record to suggest that the assessee was in any way involved or a party to the illegal misappropriation of donations made by the assessee to the donee trusts. It seems probable that these two persons namely, S/Shri Vipin Mehra and P.P. Verma devised a scheme of first gaining the confidence of approved institutions and trusts all over India and then approaching donors for making a donation to those institutions through them and then opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the complainant himself. Almost all the penal provisions which are important and have a bearing on the case of this type have been invoked by the various institutions in the criminal police complaint filed by them. No further benefit would have accrued to the donors by filing of one more additional complaint. As far as Shri Prem Prakash is concerned, the assessee took immediate steps as soon as he was able to recover most of money and removed him from whatever posts he held under the assessee's control. We agree with the arguments of the learned counsel for the assessee that the assessee could not issue a general 'firman' debarring anybody from employing him in any capacity in any company on which the assessee had no control. 22. Now the question arises whether Shri Vipin Mehra was authorised to collect the donations on behalf of the Mission at the time when assessee made donations to or he was not authorised to collect donations on behalf of Ramakrishna Vivekananda Mission or knowing this, in order to take false exemption under section 35CCA and to get back the money, the assessee had shown a donation of Rs. 5 lakhs and claimed exemption as such. In this connection, we would l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al had record finding that Shri Vipin Mehra was authorised by the Mission to collect donations. (This is an order which had been relied upon by the assessee and the department had tried to distinguish the facts of this case from the facts of the assessee's case). Thus, it cannot be said that the assessee ever knew that Shri Vipin Mehra was not an authorised agent of theMission. The bona fide of the assessee is also established by this fact that as soon as the public notice appeared in the Newspaper on September 1982 and issue came to his knowledge he wrote a letter to Shri Prem Prakash to enquire about the fate of donations made through him. The assessee took steps to approach the persons to whom the crossed cheques were issued. The first letter was written by the assessee on8-10-1983to Shri Prem Prakash through whom the donations were made to Ramakrishna Vivekananda Mission. The subsequent series of correspondence and sequence of events and efforts made by him in approaching the persons to whom the cheques or drafts were handed over yielded positive results in realising a handsome amount of Rs. 4.75 lakhs indicate that the assessee faithfully relied on the representation of Shri V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. The cheques obviously have to be signed by an authorised official of these concerns which in this case happens to be Shri Deepak Singh. The assessee's counsel's argument that Income-tax refunds have to be signed by the Income-tax Officer, but such signatures would not lead to an inference of intimacy between the Tax Officer and the assessee is well taken. In our opinion, therefore, these are normal routine commercial transactions and do not show any intimacy between the assessee and Shri P.P. Verma. 24. Further, we find that the enquiries made by the donor were earlier than the enquiries started by the department in the case of assessee and other group of companies by way of survey, searches and recording of statements. Therefore, the assessee must be conscious of the enquiries being made by the department in the case of donations. As soon as he came to know that there was some misappropriation in respect of donations, he concentrated his efforts on realising the amount and at the same time he withdrew his claim on5-11-1983by filing a revised return before the department could start action against the assessee. All these circumstances establish bona fide claim made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount and deposited it in the Manav Sewa Charitable Trust. In any way, involvement of Shri Deepak Singh is not proved in these circumstances. 26. The department's Paper Book contains statement of Shri S.C. Gupta on page 29. On a perusal of the statement, it is clear that the enquiry under section 133A of the Income-tax Act was very limited to the donation of Rs. 30 lakhs made by Inalsa to Hastimal Sancheti Memorial Trust and nothing more. We have now the benefit of the order of the Appellate Tribunal in the case of Inalsa (P) Ltd. in which the Delhi Bench has held that the donation of Rs. 30 lakhs was bona fide. Therefore, nothing adverse turns on this factum of the survey as far as the assessee is concerned. 27. The department has relied on the documents and evidence found at the time of search in the assessee's group of companies and firms but this material was neither confronted with the assessee nor made available to him. Statements were also recorded at the back and opportunity of cross-examination was not given to the assessee. Therefore, these statements and evidence cannot be used against the assessee in view of the established principle of natural justice. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he donations made are genuine. 29. The department has heavily relied on the decision in the case of Varun Enterprises and observations therein. Besides what the learned counsel for the assessee has pointed out with which we agree the main distinguishing feature we find in the case of Varun Enterprises is that the Bench there held that the penalty was leviable on the basis of preponderance of probabilities holding at the same time that there was no conclusive proof. Again for the lack of conclusive proof, the penalty was reduced to minimum. We would like to mention here that it is a moot point whether a penalty for concealment of income could be levied on the basis of probabilities. This is a distinguishing feature of Varun Enterprises. Another distinguishing feature of Varun Enterprises with other cases was that the decision of the Appellate Tribunal in the case of Inalsa (P.) Ltd. where the Tribunal accepted the genuineness of a like donation was not placed. When the attention of the Appellate Tribunal was drawn to the decision in the case of Inalsa (P.) Ltd. by way of Misc. Application, the Bench refused to recognise it holding that it would amount to review. We do not know wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ryana, and Delhi High Courts. As already noted above, SLP against Punjab Haryana High Court has been dismissed by Supreme Court and being in the jurisdiction ofDelhi, we are bound by the judgment of the Delhi High Court. We, therefore, respectfully following the decisions of theAllahabad, Punjab Haryana High Courts and Delhi High Court hold that double penalty, once on the firm and again on the partner on his share from the firm, cannot be levied. 31. Our conclusion in brief is that the evidence, averments and arguments made during the course of these appeals and records perused by us and we have not been able to find any evidence to infer that the department has detected that this donation was not bona fide or had been diverted at the instance of the assessee illegally from the donee trust for the personal benefit of the assessee. The department did not have any suspicion as to the diversification of this donation before this return was revised. The assessee himself had been disclosing right from June 1982 that it intended to make a donation eligible for deduction under section 35CCA/80GGA in his first estimate filed in June 1982 and its return in June 1993. This was the kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this case and the explanations and material made available to us that this is distinguishable from the case of Varun Enterprises. 33. Penalty under section 273(2)(a) has been imposed by the Assessing Officer for assessee having furnished estimate of advance tax which he knew or had reason to believe to be untrue. The learned counsel for the assessee contended that the result of this penalty is consequential to the appeal against levy of penalty under section 271(1)(c). This position is not disputed by the department. 34. Since we have deleted penalty under section 271(1)(c), we are of the opinion that penalty under section 273(2)(a) cannot be charged. 35. In the result, both the appeals are allowed. ANNEXURE - 'A' Statement of cases decided by the Appellate Tribunal on the point of donation 1. Inalsa Ltd. Morarji Bai 271(1)(c) CIT(A) has deleted A.Y. 1983-84 Desai Gramonati the penalty by holding Trust. that ITO has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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