TMI Blog2004 (10) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... d evidence and material in support of the same. (iii) That surrender itself was illegal and arbitrary and this fact is self-evident from the statement recorded at the time of surrender and observation of CIT(A) during appellate proceedings for asst. yr. 1996-97. (iv) That imposition of penalty is merely on the basis of surrender made before the end of financial year and having declared the surrendered amount voluntarily, there cannot be any presumption or inference about concealment." 4. The facts, as given in the appellate order, are that the assessee, who was engaged in the work of civil constructions, filed return on31st Oct., 1996, disclosing income of Rs. 32,890. Subsequently, a survey was conducted in the case of the assessee on14th Feb., 1997. During survey proceedings, statement of Shri V.D. Narang, partner of the assessee-firm was recorded. While recording the statement of Shri Narang, several questions were put to him. In reply to question No. 18, Shri Narang had submitted as under: "The books of account may be with the part-time accountant who works books at his residence. The same will be produced in your office on19th Feb., 1997. However, to buy peace with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 996-97, has been deleted, I am of the considered opinion that no penalty for concealment of income in this context can be levied upon the assessee. Under the circumstances, the penalty levied by the AO under s. 271(1)(c) of the IT Act, 1961 for asst. yr. 1996-97, is hereby cancelled." 4.4. However, the learned CIT(A) issued directions that the surrendered income is to be taxed in asst. yr. 1997-98. This observation is as under: "3.5.2. While holding the revised return as non est, I am of the considered view that the additional, income offered by the assessee with a view to buy peace and avoid litigation is still taxable in the hands of the assessee for asst. yr. 1997-98, as the said offer was made by the assessee during the period relevant to the said assessment proceedings and further confirmed by the factum of the revised return though for a wrong assessment proceeding and with which the assessee is still committed as on the date. The AO is hereby directed to include the said additional, income of Rs. 20,00,000 in the total income of the assessee for asst. yr. 1997-98. Further, the refund as determined after the processing of the original return along with the interest thereu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoid confrontation with the Department to purchase peace and under the impression that no further proceedings would be initiated against him. The surrender was not on the basis of any incriminating material found by the Department during the survey or otherwise. (3) The Department wanted to harass the assessee and survey was done only with a view to deprive the assessee of the refund due to him. This aspect has also been considered by the learned CIT(A) in the order dt.28th Jan., 2000. (4) The books were produced by the assessee before the AO during the assessment proceedings for asst. yrs. 1996-97 and 1997-98. (5) There was no concealment on the part of the assessee. It is only on account of unverifiable creditors and unvouched expenses that the surrender was made. (6) The surrender was made during the close of the asst. yr. 1996-97, and the imposition of penalty was not justified. (7) Neither in the original assessment order nor in the penalty order nor in the appellate orders the satisfaction regarding concealment of income by the assessee has been recorded. 5.1. In support of the above submissions, the learned counsel for the assessee has placed reliance on the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the surrender of Rs. 20,00,000 made by the assessee was only to avoid harassment and to purchase peace with the Department. It is also true that, Department could not find out any adverse material on survey or otherwise. Even from the books of account of the assessee no concealment was detected. 7.2. Another strange and peculiar feature of this matter is that the Department itself was not sure as to in which year the surrendered income should be added. Initially it was added in asst. yr. 1996-97, but on appeal the addition was deleted and penalty for concealment was also cancelled in that assessment year. At the direction of the learned CIT(A) the assessment was made again and the income of Rs. 20,00,000 was added in asst. yr. 1997-98,. The penalty for concealment was also initiated and imposed following the same course. 7.3. The contention of the learned Departmental Representative that, since the assessee himself surrendered the income of Rs. 20,00,000, it is itself evident that it had concealed particulars of income, cannot be accepted. The burden was on the Department to have established that the assessee had concealed the income. In the case of CIT vs. Narang Co. (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. Accordingly, no penalty could be levied for concealment." 7.5. It may be pointed out that the decision of Hon'ble Madhya Pradesh High Court, has since been affirmed by the Hon'ble Supreme Court in CIT vs. Suresh Chand Mittal, dismissing the Departmental appeals by holding that no interference with the order of the High Court was called for. 7.6. In view of the above decision of Hon'ble apex Court, penalty for concealment is not imposable merely on the basis of surrendered income and revised return. In the present case, the only basis for imposition of penalty being surrender of income and no other basis being proved by the Department to establish the concealment of income, penalty on such ground alone is not sustainable. 7.7. Now, we consider the plea of the learned counsel for the assessee that, since no satisfaction was recorded by the AO regarding concealment of income by the assessee, in the assessment order itself, on this basis also, penalty imposed is not sustainable. In support of this plea the learned counsel placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case being different, the decision is not applicable. 7.11. So far as the other authority in the case of Shyam Biri Works vs. CIT is concerned, in that case the Hon'ble High Court of Allahabad has taken a different view than taken by the Hon'ble Delhi High Court in the case of CIT vs. Ram Commercial Enterprises Ltd., regarding recording of satisfaction. The Hon'ble Allahabad High Court has observed that whenever AO has to record his satisfaction under the IT Act, it is specifically mentioned, for example, s. 148(2) of the IT Act and s. 273 do not have a similar provision requiring recording the reason for satisfaction and, therefore, it is to be inferred that Parliament never intended that before initiating penalty proceedings and issuing notice under s. 273, the AO must record his reasons in writing for doing so. It may be observed that the view taken by the Hon'ble Delhi High Court in the case of Ram Commercial Enterprises, which has again been affirmed in the subsequent decision in the case of Super Metal Re-Rollers, has got binding authority, being the decision of Jurisdictional High Court. Therefore, we have to respectfully follow the same. The assessee had also placed rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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