TMI Blog2009 (8) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... and when an assessee, in those situations, can be exempt from levy of penalty under s. 271(1)(c) of the Act, we are unable to find any reason that in case of agreed additions even though the same may be after some exercise by the AO, penalty under s. 271 (1)(c) cannot be waived. An argument can be taken that in case of block assessment the rate of tax is 60 per cent. however, in case of normal assessment, if we take into consideration various interests payable by the assessee as a consequence of an addition, the rate of tax ultimately reaches to that level. Hence, this argument cannot also be taken. Penalty waived by CIT(A) upheld - In favor of assessee. - - - - - Dated:- 12-8-2009 - Member(s) : N. L. DASH., V. K. GUPTA. ORDER-V.K. GUPTA, A.M.: This appeal by the Revenue, is directed against the impugned order dt. 22nd Feb., 2008, passed by the learned CIT(A)-II, Nagpur, for asst. yr. 2004-05. 2. We have heard both the parties and have also perused the material available on record. 3. The sole dispute in this appeal is with regard to the decision of the learned CIT(A) in deleting the penalty under s. 271 (1)(c) of the IT Act, 1961 (for short "the Act") imposed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch claim. The learned CIT(A) found that the documentary evidence regarding allotment of shares of these three companies along with the confirmations were on record, hence, it amounted to discharge of its onus under s. 68 of the Act, however, despite that fact, the assessee chose to offer the same as income and, in these circumstances, in the absence of any other material on record, it could not be said that the assessee had concealed its income. The learned CIT(A) also held that both, assessment proceedings and penalty proceedings were different in nature and scope and the AO did not make any effort to gather any material/evidence for proving the fact of concealment in the penalty proceedings, hence, for this reason also, penalty was not leviable. The learned CIT(A), relying on various judicial decisions, also held that the admission of income by the assessee during the course of assessment proceedings to buy peace did not amount to concealment of income. Accordingly, he cancelled the penalty. Aggrieved by this, the Revenue is in appeal before the Tribunal. 6. Learned Departmental Representative placed strong reliance on the order of the AO and also referred to the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various judicial decisions for the proposition that no penalty could be levied on unexplained cash credit surrendered by the assessee. He also placed reliance on the decision of the Hon'ble Supreme Court in the case Suresh Chandra Mittal and contended that it was distinguished by the AO for frivolous reason and the ratio of this decision was squarely applicable to the facts of this case. As regards to the query of the Bench in respect of applicability of the ratio of the decision of the Hon'ble Supreme Court in the case of Union of India Ors. vs. Dharamendra Textile Processors (2007) 212 CTR (SC) 432 : (2007) 295 ITR 244 (SC), he referred to para 48 of the order of the Tribunal in the case of Kanbay Software India (P) Ltd. vs. Dy. CIT (2009) 22 DTR (Pune) 481, and contended that, in that case, the Hon'ble Supreme Court held about the nature of such proceedings and which was found to be of civil nature, hence, mens rea was not required to be proved. The learned counsel further contended that this decision could not be viewed as giving blanket permission for levying penalty under s. 271(1)(c) as a natural consequence of an addition. In this regard, he further contended that penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to apply his mind afresh in the course of penalty proceedings and, thus, in our opinion, he cannot levy the penalty under s. 271(1)(c) of the Act solely on the basis of statement given by the assessee in the course of assessment proceedings. Admittedly, the AO has issued questionnaire on 24th July, 2006 whereby the assessee was required to submit details of share capital. The assessee has submitted such details on 9th Aug., 2006 as evident from the assessment order. Thereafter, the assessment proceedings appear to have taken place only on 1st Dec., 2006 when statement of Shravan Kumar Malu was recorded wherein he offered the amount of share capital including share premium as the income of the assessee. These sequence of events make this case as an exceptional case because no enquiry has been conducted by the AO directly from such shareholders which, generally, precede the issuance of summons under s. 131 and that too when other party does not confirm the transaction or letter issued by the AO remains unserved or other circumstances warrant so. Further, in the first statement itself the said director has agreed to offer such capital as income and that too without any conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bona fide. It is also noted that the AO even has not collected the information from the RoC or from such companies to find out the truth and has merely rejected the explanation of the assessee. In our opinion, in view of above facts, such action of the AO cannot be construed as due discharge of his obligation within the meaning of provisions of s. 271(1)(c) of the Act, as mere rejection of bona fide explanation of the assessee is not sufficient and the AO must bring further material on record to justify the levy of penalty. 10. The learned counsel for the assessee has placed strong reliance on the decision of the Hon'ble Supreme Court in the case of Suresh Chandra Mittal which was distinguished by the AO for the reason that, in that case, there was voluntary offer for addition of income before being detected by the AO. However, the perusal of the facts from the decision of the Hon'ble Madhya Pradesh High Court in that case, it appears that the revised return was filed as a consequence of search and issuance of notice under s. 148 of the Act which by itself indicate that there must be some escapement of income and, therefore. the facts of both these cases are substantially similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial discretion vested in the AO redundant. The purpose of this discussion is to highlight the fact that when due to efforts made by the AO or otherwise, an assessee agrees for an addition, such action of the assessee certainly lightens the burden of AOs. Further, the Department also gets its due share of revenue along with the interest. Generally, the assessee agrees for addition to buy peace and avoid litigation and under bona fide belief that the penalty would not be levied thereafter. It is generally believed that this legitimate expectation of the assessee is not binding on the AO because the assessing authority cannot make a promise against statute. But when there is a discretion with the AO, then, such legitimate expectation should be fulfilled as the principle of estoppel can be applied only when there is no discretion. To put it differently, the AO by not levying penalty under s. 271 (1)(c), in such situation will be justified in exercising judicial discretion given to him by the legislature. This is also so for the reason that all the official acts are presumed to be done bona fidely. Further, if the official acts are presumed to be done bona fidely, there appears to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein the assessees have been exempted from levy of penalty. An argument can be taken that in case of block assessment the rate of tax is 60 per cent. however, in case of normal assessment, if we take into consideration various interests payable by the assessee as a consequence of an addition, the rate of tax ultimately reaches to that level. Hence, this argument cannot also be taken. From the above discussions, it is amply clear that concept of plea bargain is recognized in the IT Act, 1961, in specific situations as well as by giving discretion to the AO to levy or not to levy penalty under s. 271(1)(c), hence, in our humble opinion, the AO, in case of agreed additions, should not levy penalty under s. 271(1)(c). 12. Further, if we assume a situation that the assessee, in the present case, instead of agreeing for addition would have contested the matter, then, perhaps in view of the decision of the Hon'ble Supreme Court in the case of Lovely Exports cited by the assessee, even addition could not be made or could not have been sustained. Further, such course of action would have made it possible to the assessee to plead various reasons which would have enabled the assessee to g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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