TMI Blog2013 (1) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.40,74,000/-. The assessee merely stated that with a view to avoid litigation and buy peace it surrendered the income under the head “income from other sources”. In the absence of any explanation in respect of the surrendered income, the first part of clause (A) of Explanation 1 is attracted. It cannot be denied that the nature and source of the amount surrendered are facts material to the computation of the total income of the assessee. The Revenue is entitled to know the same and if the nature and source of the amount are not explained, it is entitled to draw the inference that the amount represents the assessee's taxable income. It is the assessee who has received the monies & in the absence of any explanation is statutorily co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to certain entities who had applied for shares in the assessee company. What the AO wanted the assessee to do was to prove the nature and source of the monies received as share capital, the creditworthiness of the applicants and the genuineness of the transactions. 3. In response to the above notice which was issued on 26th October, 2006, the assessee stated as under:- It has been stated that the company had received share application money from different entities aggregating to a sum of Rs.239 lacs during the past 3 years as: Assessment Year Amount 2002 2003 12,00,000 2003 2004 1,06,50,000 2004 2005 1,20,50,000 2,39,00,000 The company with a view to avoid litigation and bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of penalty proceedings and prosecution. It appears that thereafter the assessee filed an application before the Addl. Commissioner of Income Tax under Section 144A soliciting directions for expediting the assessment proceedings and therein it indicated its willingness to be assessed on an amount of Rs.56.49 lacs as its income under the head income from other sources . It may be noticed that this figure represents the difference between the amount of Rs.239 lacs and Rs.1,82,51,000/-. After certain correspondence between the AO and the Addl.CIT, a letter was issued on 27th December, 2006 containing the directions of the Addl.CIT. The entire directions are reproduced in the assessment order and is, therefore, not reproduced here for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untary. Several authorities were relied upon in support of the submission. However, the submissions were rejected by the AO who, by the order dated 23.4.2007, imposed the minimum penalty of Rs.14,16,600/- for furnishing inaccurate particulars of income to the extent of Rs.40,74,000/-. The ultimate findings of the AO on the basis of which the penalty was imposed were as follows:- 23. The reply furnished by the assessee has been considered found to be unsatisfactory because of the following: - a) In the return filed by the assessee the assessee has not offered the amount of Rs.40.74 lacs for taxation voluntarily. b) The assessee has surrendered the above amount of Rs.40.74 lacs during course of assessment proceeding when the impounde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty without recording any finding on the merits of the assessee‟s plea was untenable. The Tribunal on examination of the facts and the rival contentions cancelled the penalty recording the following findings:- (a) It was only after the directions of the Addl.CIT issued under Section 144A that the assessee‟s offer was accepted and the assessment was finalized; (b) There was no material against the assessee to show any concealment and this fact has been admitted by the AO himself; there is not even any indication in the penalty order as to the particular credit in respect of which the penalty was being imposed; (c) The fact that the assessee surrendered the income only when it was confronted with the documents found in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. In the case before us the revenue is right in contending that there was absolutely no explanation from the assessee in respect of the amount of Rs.40,74,000/-; when the AO called upon the assessee to produce the evidence as to the nature and source of the amount received as share capital, the creditworthiness of the applicants and the genuineness of the transactions the assessee simply folded up and surrendered a sum of Rs.56.49 lacs in its hands initially, which was later scaled down to Rs.40,74,000/-. The assessee merely stated that with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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