TMI Blog2012 (12) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah, SR-AR By Respondent Shri Samir Takriwal , SR-DR ORDER PER B.P. Jain, Accountant Member:- This appeal of the assessee arises from the order of Ld. Commissioner of Inc-tax (Appeals)-II, Baroda dated 25-01-2008 for the assessment year 2001-02. The assessee has raised the following ground of appeal:- 1. The C.I.T.(Appeals) erred in upholding the penalty under sec. 271(1) of Rs.12,15,000/-. 2. The C.I.T.(Appeals) erred in not considering the overall facts and circumstances of the case and in the process erred in confirming the penalty. 2. The brief facts are that the Assessing Officer stated in the penalty order that during the course of the survey, on the basis of loose torn paers, the partner of the firm, Shri Mukund Shah admitted that these papers related to sales of financial year 2000-01 and on the basis of these papers the assessee admitted that unaccounted sales of Rs.25 lakh escaped from tax. The partners accepted that the unaccounted sale consideration has been utilized by the partners in repair of their residence and other expenses. Hence, this income had already been earned and invested by he assessee-firm and its partners. The AO also st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts business needs it has to borrow sizeable funds from its associate concerns, friends, etc. and there funds along with surplus funds are advanced to sister concerns and other parties as loans. The assessee during the year under consideration received interest from various parties and also paid interest on the borrowings made. During the course of assessment proceedings, the AO has established that there was nexus between interest bearing funds borrowed by the assessee and the advances made to the parties from whom no interest was charged as the entire funds borrowed and advances were routed through the cash credit account and as per the provisions of Section 36(1)(iii) of the Act in case the loans are not utilized for the business purpose no deduction on account of interest shall be allowed. The AO held that the assessee has concealed its income. On this ground, the AO has relied on the following case laws:- 1. CIT v. Musadilal Ram Bharose 165 ITR 14,20 (SC) 2. CIT v. K. R. Sadyappan 185 ITR 49 (SC) 3. CIT v. Jeevan Lal Shah 205 ITR 244 (SC) 4. B.A Balasubramaniam Bros. Co. v. CIT (1999) 236 ITR 977, 978 5. K.P. Madhusudan v. CIT 251 ITR 99 The Assessing Officer held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 410 (Guj) in support of his argument. Moreover, the statements during the survey do not have any evidentiary value was relied upon by Mr. Shah as held by Hon ble Kerala High Court in the case of Paul Mathus and Sons v. CIT (2003) as reported in 263 ITR 101 (Ker). 6. On the other hand, Ld. DR Shri Samir Tokriwal argued that during the course of survey excess cash of Rs.11 lakh was found and excess stock of Rs.18 lakh was also found apart from excess sales of Rs.25 lakh. The Assessing Officer in the penalty proceedings have given the clear-cut finding that the assessee had concealed the income. Therefore the Ld. DR supported the order of both the authorities below. Ld. DR Mr. Tokriwal in support of his arguments relied upon the various courts law as under;- a) DCIT v. Jayantilal Ambalal Chokshi b) CIT v. Prasad Granites c) ACIT v. Goutham Public School (2004) 88 TTJ 933 (Visakha) d) CIT v. K.P. Smpath Reddy (1993) 197 ITR 232 (Kar) e) Biland Ram Hargan Dass v. CIT (1988) 171 ITR 390 (All) f) LMP Precision Engg. Co. Ltd. v. DCIT (2011) 330 ITR 93 (Guj) 7. We have heard the rival contentions and perused the facts of the case. The assessee in the present case had filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ender done by the assessee which was made to buy peace of mind. In such circumstances and facts of the case, no penalty u/s. 271(1)(c) of the Act can be levied. We rely upon the judgment of Hon ble Supreme Court in the case of CIT v. Suesh Chandra Mittal (2001) as reported in 251 ITR 9 (SC). The head-notes of the same for the sake of clarity are reproduced as under:- The assessee had originally filed returns showing meager income. When, after action under section 132 of the Income-tax Act, 1961, a notice under section 148 was served on him, he filed revised returns showing higher income. Eventually, assessment orders were passed and the returns submitted regularized under section 148. In penalty proceedings under section 271(1)(c), the assessee claimed that he had offered additional income to buy peace of mind and avoid litigation. Penalty orders were passed and the Commissioner (Appeals) confirmed the orders. But the Appellate Tribunal held that the Department had not discharged its burden of proving concealment and had simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith, and that penalty could not be levied. On a reference, the H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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