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TMI Blog2010 (12) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 9,90,994 and penalty proceedings were initiated. In response to show cause notice the assessee replied that it had voluntarily offered this income as undisclosed income to avoid prolonged litigation and to buy peace. Even assessment was completed on the same income and as such no penalty should have been levied. The Assessing Officer was not satisfied and has stated that earlier before the A.D.I., the assessee had submitted details and explanation of the cash seized but could not explain the source of cash during the assessment proceedings. He, therefore, levied a penalty of Rs. 7,31,850. 3. It was submitted before the learned CIT(A) that though the assessee had submitted entire details before ADIT (Mumbai) but when assessment proceedings were initiated the assessee did not want to prolong the litigation process and with a view to buy peace of mind, entire income was offered to tax and even the assessment was made on the same income. Since, the entire income was offered to tax there was no question of explaining the source of the same funds as alleged by the Assessing Officer in the order of penalty. Apart from that, following submissions were made: "The appellant is an An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original return filed under section 139(1). It may not be out of place to mention here that the income disclosed in the return is accepted as such and there is no question of tax sought to be evaded. We have to further inform you that in order to purchase peace of mind and to end prolonged litigation we had offered this amount of Rs. 20 lakhs in the return as undisclosed income. We have offered full co-operation at the time of assessment proceedings by furnishing the requisite information called for by you from time to time and have attended your office whenever called for. We have also not filed any appeal against the said order passed under section 153C. Hence it is requested that the penalty proceedings initiated under section 271(1)(c) may please be dropped for which act of kindness we shall remain grateful. We hope the above information will serve your propose and if any further elucidation is needed, please give us an opportunity. The Assessing Officer did not accept the explanation given by the appellant on the ground that the appellant did not disclose the amount of Rs. 20 Lakhs in the original return of income filed on 14-10-2005 much later to the search conducted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of kindness, the appellant as is duty bound shall remain grateful." 4. The learned CIT(A) considering the submissions of the assessee and the material on record cancelled the penalty. His findings in Para 6 and 6.1 are reproduced as under: "6. I have considered the submissions made. It is clear that whatever income was offered by the assessee in the return has been accepted and as such there was no question of explaining the source of cash. The only aspect is that the income was offered after the date of search. The assessee has stated that though it had explanation for the cash but the same was offered as income to avoid prolonged litigation and to purchase peace of mind. The assessee had relied on the decision of Hon'ble Supreme Court in the case of CIT v. Sureshchandra Mittal 251 ITR page 9. In this case it has been held by the Hon'ble Supreme Court that when assessee offers income even after a search in response to notice under section 148 to avoid litigation and to buy peace, no penalty for concealment should be levied. The Hon'ble Supreme Court has in fact confirmed the order of M.P. High Court reported in 241 ITR page 124 in which Hon'ble High Court had held that in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow and referred to PB-5 reply before ACIT dated 19-2-2007 and PB-6 reply dated 18-8-2004 filed before ADIT (Investigation). He has submitted that when the assessee realized to avoid unnecessary litigation, in order to buy peace surrendered their income in response to the notice issued under section 153C of the Income-tax Act. He has submitted that all the facts were within the knowledge of the revenue department; therefore, it is not a case of concealment. In the alternative contention he has submitted that since the assessed income is ultimately computed at Rs. 9,90,994, therefore, penalty should not have been imposed on the entire amount. Penalty at the most could be imposed on the assessed income of Rs. 9,90,994. 7. We have considered the rival submissions and the material available on record. The Hon'ble Bombay High Court in the case of Jyoti Laxman Konkar v. CIT [2007] 292 ITR 163 held as under: "The assessee had filed a return for the assessment year 1999-2000 declaring an income of Rs. 7,40,510. Not satisfied therewith, the Assessing Officer carried out a survey under section 133A of the Income-tax Act, 1961, and during the survey found that there was a discrepancy in stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in consequence of a search conducted in the business premises of the assessee on 25-10-1978, i.e., after the filing of the original return. The total income of the assessee was ultimately determined at Rs. 2,59,315 by the Tribunal. The Income-tax Officer initiated penalty proceedings under section 271(1)(c) of the Income-tax Act,1961 for concealment of income and levied a penalty of Rs. 1,04,000, on the ground that it was only after the search was conducted and the Income-tax Officer found that the assessee had considerable business outside his books and called upon the assessee to explain the nature of entries in the seized papers, that the assessee was forced to file a revised return. The Income-tax Officer and the Tribunal found that the revised return was filed on account of any bona fide inadvertence or omission in the original return. The Tribunal also found that the surrender of income was not voluntary but was as a result of detection made by the Income-tax Officer, that the revised return was filed by the assessee to escape penalty by making averments in the covering letter dated 28-9-1979, in its own favour to the effect that it was with a view to purchase pea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, it is clear that the assessee has concealed the particulars of income and has deliberately filed inaccurate particulars of income. Admittedly, search was conducted on 21-7-2004/22-7-2004 and cash belonging to the assessee was found which was also admitted later on by the assessee. The filing of return for the assessment year 2005-06 was not due on the date of search and the assessee had ample time to file the return for assessment year under appeal which the assessee ultimately filed his regular return of income on 14-10-2005. The assessee till that time never accepted that the cash in question was the unaccounted money of the assessee. The cash so found was also not declared as undisclosed income in the original return of income. Later on, the assessee admitted that the amount of Rs. 20,00,000 is its undisclosed income. Therefore, on the date of filing of return the assessee was aware that the amount in question was undisclosed income of the assessee and if the assessee wanted to include the undisclosed income of Rs. 20,00,000 voluntarily in the original return of income it could have done so on the date of filing of the original return of income on 14-10-2005, but the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner. It is only because of the fact that search was conducted and unaccounted cash belonging to the assessee was found during the course of search, the assessee later on made a surrender of cash of Rs. 20,00,000 which cannot be said to be bona fide action on the part of the assessee because the assessee despite having ample opportunity from the date of search in July, 2004 till the date of filing of the original return on 14-10-2005 had been claiming it to be accounted cash for which no evidence was filed at any stage. For what purpose the assessee was waiting for making a surrender on 3-1-2007 is not clear. The above facts, therefore, would show that the learned CIT(A) was not justified in deleting the penalty. The learned CIT(A) relied upon the decision of the M.P. High Court in the case of CIT v. Suresh Chandra Mittal [2002] 123 Taxman 1052 in which it was held that once revised return was regularized by the revenue and no objection is taken and that the explanation of the assessee was that in order to buy peace with the department and to avoid litigation surrender was made. The Tribunal accepted the plea of the assessee and accordingly the departmental appeal was dismissed. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; (b) in any case to which Explanation 3 applies, means the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148; (c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished." The above matter has not been considered and discussed by the Assessing Officer while imposing the penalty, because the penalty could have been imposed on the assessed income only. Therefore, in our view since the learned CIT(A) cancelled the penalty on merit and has not adjudicated upon the quantification of the penalty as well th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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