TMI Blog1992 (9) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, enquiries were made by him and the Dy. Commissioner with the villagers and it was noted that some of them had, in fact, died before the date of the claim of cash credits in their names while others were illiterates and could put only their thumb impression on the consent letters. He also noted that the consent letters were written in English which almost all of them did not know. During the examination of the accounts for the asst. yr. 1986-87, proceedings under s. 132(1) of the IT Act, 1961, were taken against the assessee on 22nd Dec., 1986. During the said proceedings under s. 132, a statement of one Shri R.M. Thakare was recorded under s. 132(4). According to this statement, Shri Thakare merely arranged consent letters on the request of Shri Meshram. In reality, however, no such amount was said to have been passed from those so called creditors to the assessee. Shri Thakare and Shri Lallubhai Patel (Hiranwar) and Shri Nikhare who appeared as creditors in the books also denied having advanced any money. During the search and seizure proceedings, the statement of Shri Meshram, partner, was also recorded on 22nd Dec., 1986. He was offered an opportunity to cross-examine S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed to have signed the confirmatory letters filed by Shri M.R. Meshram. (ii) Some of the creditors who are illiterate and who only put their thumb impression are claimed to have signed the confirmatory letters, surprisingly in a few cases the signature was in English; (iii) whoever creditor who was personally examined under s. 131 had not only denied to have signed the confirmatory letters but also stated that they had no means to give any loan to anybody. Besides the above facts, Shri M.R. Meshram, Partner had stated on 22nd Dec., 1986 in the statement made by him under s. 132(4) of the Act that he obtained the above mentioned loan of Rs. 9,50,000 through S/Shri R.M. Thakare and L.N. Patel (Hiranwar) but declined to cross-examine these persons when such an opportunity was offered. The statement on oath made by Shri R.M. Thakare under s. 132(4) of the Act brings out the fact that he merely arranged for the confirmatory letters but in reality no cash had passed through him from the so-called creditors to the assessee- firm. Shri L.N. Patel (Hiranwar) had also made a similar statement." 6. It is notable that in this letter also the Assessing Officer had not pointed out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by you in compliance with the summons under s. 131 of the Act dt. 15th Jan., 1987. This would show clearly that your statement in the letter under reference that we had seized all your record is false." It is notable that the Assessing Officer in this letter does not talk anything about the inspection of the records. A good number of books and documents were in possession of the Department on that date. There is no reference to inspection of such records. 7. On 17th Feb., 1987 the Assessing Officer wrote another letter to the assessee. In that letter, he informed the assessee that he was given an opportunity to prove the genuineness of the said cash credits, but the assessee did not furnish any information in that regard. He also invited his attention to the fact that except for photo-type consent letters in the case of each of such cash credit, he had failed to furnish full identity of the creditors by giving their complete, correct and current addresses and also by giving the permanent account No., GIR Nos. etc. In para 5 of the said letter he has mentioned that the assessee had consciously and actively concealed the true income of the firm. He allowed the assessee anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n letters referred above and seeking its compliance on or before 26th Feb., 1987. We are interested in completing the assessment proceedings, at the earliest and accordingly discussed all the matters with your goodself, and also with higher authorities. However, to comply with your requirements, with supporting documents and necessary evidence, we require some more time. It is, therefore, prayed that reasonable time may be allowed to us, to comply with all your requirements." It is notable that this letter talks about the discussion with the ITO and also with higher authorities. On 26th Feb., 1987 the assessee wrote another letter to the ITO in which he offered the sum of Rs. 9,50,000 for the purposes of taxation. The letter is in nature of an offer and reads as under: "Dear Sir, During the course of assessment proceedings, certain queries were raised vide your letter dt. 17th Feb., 1987 regarding cash credits of Rs. 9,50,000, dt. 19th Feb., 1987 regarding cash purchase and dt. 21st Feb., 1987 regarding cash payments and accounts. The assessee has to submit as under: Regarding cash credits Rs. 9,50,000 The assessee has to submit that the firm has borrowed the said loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reply is given with a view to complete the assessment on agreed basis, to avoid further litigation and penalty proceedings in the matter. However, if the same is not agreed upon, we may be allowed further time to adduce necessary evidence regarding cash credits and also inspection of records to substantiate our claim regarding expenses and to clarify the accounts." On 27th Feb., 1987, the assessee wrote another letter to the Assessing Officer which reads as under : "We therefore, pray that on agreed basis the income of the firm may be assessed as follows : (1) Income from business: Gross profit estimated @ 13.3% on contract receipts of Rs. 1,20,27,078 Rs. 16,23,655 Less: Exp. claimed Rs. 8,50,000 . Rs. 7,73,655 Add: expenses covered under s. 40A(3): Rs. 2,06,477 Other sources unproved cash credits. Rs. 9,50,000 Total Rs. 19,30,132 10. It is notable that the assessee offered in all a total income of Rs. 19,30,132 for asst. yr. 1985-86 on 27th Feb., 1987 in a letter which is in continuation of the letter dt. 26th Feb., 1987. The Assessing Officer has discussed the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Dec., 1986 written by the Assessing Officer to the CIT regarding the assessment for the asst. yr. 1985-86 completed by the Assessing Officer earlier. When the assessee's counsel objected that this letter was not utilised by the Assessing Officer for imposition of a penalty, the Departmental Representative submitted that the CIT had taken this letter into consideration. It was, therefore, submitted that the letter in question was taken into consideration by the CIT(A) and as such a copy of the same can be placed on the record without seeking any permission of introducing new evidence on record. It was submitted that this letter dt. 23rd Dec., 1986 invited the attention of the CIT to the fact that the assessee had introduced a loan of Rs. 9,50,000 in 1985-86 in the names of 104 persons. He also invited the attention of the CIT to the fact that most of the creditors were from two villages of Warud Tahsil of Amravati District. His attention was invited to the stereo-typed consent letters written by the said parties. It was submitted that several letters were sent to the creditors along with the notice under s. 131. Most of the persons did not submit any reply. Our attention was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was served with a notice in this regard. The penalty in any case was imposed only on the completion of the assessment. It was, therefore, submitted that the action taken by the Assessing Officer in issuing notice before completion of the assessment proceedings and in imposing the penalty only after the completion of the assessment proceedings is in conformity with the law. The Departmental Representative further relied upon, in this connection, on the decision of the Supreme Court in the case of D.M. Manasvi vs. CIT 1972 CTR (SC) 437 : (1972) 86 ITR 557 (SC). It was submitted that the ITO had made the particular assessment after enquiry and the assessee was allowed an opportunity to explain the cash credits. The Departmental Representative proceeded to take us through the various letters from 6th Jan., 1987 to 27th Feb., 1987 written both by the assessee and by the Department and submitted that time after time, the Department allowed the assessee an opportunity to prove the genuineness of the credits and the assessee did not avail all the opportunities offered. When the assessee realised that there was no escapement, by his letter dt. 22nd June, 1987, he offered to be assessed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. He also submitted that reliance of the CIT(A) on the decision of the Punjab and Haryana High Court in the case of Banta Singh Kartar Singh vs. CIT (1980) 125 ITR 239 (P H) is not proper. It was submitted that this decision of the Punjab and Haryana High Court is nothing but an extension of the decision of the Bombay High Court in the case of Jivatlal Purtapshi. It was submitted that in that case, the penalty was imposed on the basis of the agreement made by the assessee. Therefore, the facts of that case do not apply to the facts of this case. Inviting our attention to the nature of concealment, it was submitted that the assessee introduced the cash credits in the names of 104 persons, knowing to be false, but obtained the consent letters through one Shri Thakare who clearly stated that the letters were obtained with a view to help the assessee and the assessee who could not offer any explanation in this regard, is an assessee liable to be penalised under s. 271(1)(c). It was submitted that pre ponderence of probabilities clearly supports the view taken by the Department that the assessee deliberately and under proper planning, attempted to introduce his own income through bogu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention anything about the non-imposition of penalty. It was submitted that the assessee when realised that there was no escapement route available to him, agreed to be assessed on its income. Regarding the application of principle of promissory estoppel by the CIT(A), it was submitted that the letter of the assessee written on 20th Feb., 1987 was not an authority which could give any immunity in law with regard to the penalty and prosecution. Any person who is not authorised to make any promise cannot be estopped from passing order in due exercise of his jurisdiction. The Departmental Representative then proceeded to rely upon the decision of the Delhi High Court in the case of Durga Timber Works vs. CIT (1971) 79 ITR 63 (Del) and the decision of the Bombay High Court in the case of Western Automobiles (India) vs. CIT 1977 CTR (Bom) 303 : (1978) 112 ITR 1048 (Bom). He also relied upon the decision of the ITAT, Nagpur in ITA No. 405/Nag/85 dt. 20th June, 1989 and ITA Nos. 525 to 529/Nag/86 dt. 13th Aug., 1990. He submitted that the facts of those cases are at par with the facts of this case. It was submitted that the CIT(A) should not have cancelled the penalty. The Departmental R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had also used the phrase "on agreed basis." The Assessing Officer while proceeding to pass the order not only accepted the G.P. rate estimated at 13.5% on Rs. 1,20,27,078, he also allowed the assessee the deduction of Rs. 8,50,000. It was submitted that this clearly establishes that there was an agreement between the Department and the assessee regarding the assessment to be completed on a particular figure. If it was not so, the Assessing Officer had never adopted those figures in his order, under s. 143(3). It was submitted that the letter submitted on 27th Feb., 1987 supported the process and has to be taken into consideration for the purpose of imposition of the penalty. It was submitted that in the letter dt. 26th Feb., 1987 the assessee stated "since Shri Thakre and Shri Patel as referred in the letter had denied that they had given these amounts to the firm, we have no objection for getting the same to be assessed in the firm's case to avoid further litigations with a view to complete the assessment proceedings on agreed basis to avoid penalty and other proceedings. However, we shall be highly obliged if a copy of these statements are given to us to enable us to safe- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention was also invited to the decision of the Supreme Court in the case of CIT vs. S.V. Angidi Chettiar (1962) 44 ITR 739 (SC) at 745. 17. We are of the opinion that in this case, the CIT(A) was justified in cancelling the penalty so imposed by the Assessing Officer for the year concerned. On going through the entire case record and after hearing both the Departmental Representative and the assessee's counsel, we could not find any material to hold that the Department, at any stage, gave the copies of the statements recorded by it from the creditors to the assessee for cross-examination. The right of cross-examination had to be given during the assessment proceedings. When the Department started the assessment proceedings after passing of the order under s. 263, then at that relevant time, it should have offered the statements for assessee's perusal and cross-examination, if any. It is the law of the land that the statements of the witnesses examined during the investigation must be supplied to the person who is accused of certain crime. It is unjust and unfair to deny such a person copies of the statements of the witnesses examined during the investigation and during the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the concession given by the assessee, the Department cannot proceed to impose the penalty for concealment on the basis of the said concession. We are not trying to impose any impossible burden on the Department to prove its case, what we wish to observe is that if after giving a proper opportunity and not a only illusory opportunity as has been done in this case, the Department comes to a conclusion that there was an act of concealment, it can always proceed to impose the penalty. In this case, nothing in this regard, has been done. Such is not the case here. 18. The letter of the assessee dt. 27th Feb., 1987 is in continuation of their earlier letters. Even in this letter a specific rate of gross profit of 13.5% on contract receipts of Rs. 1,20,27,078 has been offered for taxation. Application of this rate of profit has been accepted by the Department. A round figure of Rs. 8,50,000 was offered by the assessee to deduct as expenses pertaining to the profit and loss account from this gross profit. This has been accepted by the Department in toto. A sum of Rs. 9,50,000 has been offered by the assessee in the letter dt. 27th Feb., 1987 as "other source not proved cash credits". T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut any material to prove that the offer of the assessee was an eye-wash. There is no such material on record to hold this view. Under the circumstances, we are of the opinion that the decision of Sir Shadilal Sugar General Mills Ltd. Anr. vs. CIT (1987) 64 CTR (SC) 199 : (1987) 168 ITR 705 (SC), referred to above, is applicable to the facts of this case. The material on record clearly establishes that the assessee entered into an agreement with the Department to offer certain amount for taxation. The Department has failed to conclusively establish that such items were the items of concealment. We also find that the decision of the Madhya Pradesh High Court in the case of CIT vs. Punjab Tyres (1986) 56 CTR (MP) 7 : (1986) 162 ITR 517 (MP) and the decision in the case of Bhagwanji Co. vs. CIT (1982) 28 CTR (Cal) 375 : (1983) 141 ITR 640 (Cal) are applicable to the facts of this case. The decision of the Hyderabad Bench of the Tribunal in the case of Mahavir Transport is also relevant in this regard. We, therefore, uphold the order of the CIT(A) cancelling the penalty imposed by the Assessing Officer under s. 271(1)(c). 19. In the result, the Departmental appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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