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Mohd. Irshad Versus Income Tax Officer, Ward-2 (1) , Muzaffarnagar

2015 (7) TMI 4 - ITAT DELHI

Penalty imposed u/s 271(1)(c) - addition on account of undisclosed business income - Held that:- AO while framing the assessment u/s 143(3) r.w.s 147 of the Act nowhere recorded the satisfaction that the assessee either concealed the income or furnished inaccurate particulars of income. He simply stated that the penalty notice u/s 271(1)(c) of the Act was being issued separately, therefore, in view of the ratio laid down by the Hon’ble Jurisdictional High Court in the aforesaid referred to cases .....

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d as fabricated. However, during the course of original assessment proceedings the same was accepted and no fault was found in the said account, even when assessment was framed u/s 143(3) of the Act. However, letter on the case was reopened u/s 147 of the Act by issuing the notice u/s 148 of the Act and the AO inquired about the source of ₹ 50 lac which was entered in the books of accounts by the assessee, the source of the said amount was explained as advance money amounting to ₹ 40 .....

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for surrender, so it was a good case to make the addition, however the said surrender itself cannot be considered as a concealment of particulars of income because all the relevant information were already available with the AO who framed the original assessment u/s 143(3) of the Act, it can also not be said to be a case of concealment of income because the AO in the body of assessment order has not stated that it was a concealed income of the assessee or the income for which inaccurate particu .....

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of ld. CIT(A), Muzaffarnagar. 2. Following grounds have been raised in this appeal: 1. That the Ld. CIT(A) has erred in confirming the order passed by the Assessing Officer and thereby confirming the penalty imposed by him u/s 271(1)(c) of the Act. 2. That the observation made by the CIT(A) that the Assessing Officer had recorded the satisfaction for initiation of penalty in respect of addition of ₹ 50 lacs in the body of assessment order, is incorrect on the face of record and therefore, .....

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icer u/s 147/148 of the Act, in pursuance to which the penalty proceeding was initiated, was not in accordance with law. 5. That the Ld. CIT(A) has erred in confirming the penalty despite the fact that the surrender of ₹ 50 lacs made by the assessee was bonafide. 6. That the Ld. CIT(A) has erred in confirming the penalty ignoring the material fact that the Assessing Officer had accepted the surrender; it is a well established principle that the surrender made by the assessee is either to b .....

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50 lacs was received. In fact, the assessee had explained the source since he was not able to produce the party, he had surrendered the amount which was voluntary and bonafide. Hence no penalty could have been imposed by the Assessing Officer. 9. That the observation of CIT(A) is vague when he held that the assessee had failed to adduce any satisfactory explanation in rebuttal of the presumption that the amount of ₹ 50 lacs represented his unexplained money. In fact, the assessee himself h .....

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and confirmed by CIT(A). 11. That the penalty levied by the Assessing Officer was unwarranted on the facts and circumstances of the case, the CIT(A) has arbitrarily confirmed the same and therefore, it was liable to be deleted. 12. That the appellant seeks leave to add, amend, alter abandon or substitute any of the above grounds during the hearing of the appeal. 3. From the above grounds, it is gathered that only grievance of the assessee in this appeal relates to the confirmation of penalty lev .....

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of ₹ 57,95,000/-. Subsequently, the notice u/s 148 of the Act was issued to the assessee and the reassessment was completed u/s 147 of the Act at an income of ₹ 57,55,218/- by making the following additions: 1. On account of undisclosed business income 50,00,000/- 2. On account of unexplained expenditure 7,13,535/- Total 57,13,535/- 5. The AO initiated the proceedings u/s 271(1)(c) of the Act. In the meantime, a rectification order u/s 154 of the Act was passed and income of the asse .....

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e. The AO after receiving the order of the ld. CIT(A) of issued a notice u/s 271(1)(c) of the Act and the assessee furnished a written reply stating therein as under: (i) the assessee being illiterate person, in order to avoid any dispute and to purchase peace of mind and to avoid litigations, surrendered the amount of ₹ 50,00,000/- for taxation subject to no penal action, as there is no concealment of any income. The assessee has made this offer to tax ₹ 50,00,000/- with clean hands .....

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unt. Thereafter, the proceeding of re-assessment started and concluded vide assessment order dated 29.12.2010. It was also agreed at the point of surrender that the tax payable on this amount will also be paid at stipulated time on receipt of assessment order. So the action on the part of the assessee proves that he has fulfilled the conditions of surrender and there is no outstanding of any tax liability against him. 6. The AO did not accept the conditional surrender of ₹ 50,00,000/- subj .....

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2 ITR 828 Ø Union Engineering Co. Vs CIT (Ker) 122 ITR 719 Ø ITO Vs Leela Mammen (ITAT, Cochin) 63 TTJ 252 Ø Jaswant Rai & Another Vs CBDT & Ors. (Del) 133 ITR 19 Ø CIT Vs Gates Foam & Rubber Co. (Ker) 91 ITR 464 Ø CIT Vs P. B. Shah & Co. (Pvt.) Ltd. (Cal) 113 ITR 587 Ø Rathnam & Co. Vs IAC (Mad) 124 ITR 587 Ø ACIT Vs S. M. Kannappa Authomobiles (P) Ltd. (ITAT, Bang) 72 ITD 474 7. The AO held that the assessee concealed the inc .....

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batim as under: The basic issue involved in the present appeal is, whether the Assessing Officer was correct in law and on facts in imposing the penalty of ₹ 17 lac u/s 271(1)(c) of the Act and whether the Assessing Officer is correct in law in imposing the penalty in pursuance to the invalid and illegal re-assessment proceeding. FACTS a) The appellant carrying on the business from its proprietary concern M/s Macro Industries, Rampuri, Muzaffarnagar. b) Return u/s 139(1) was filed by the a .....

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repancy in the page number of cash book mentioned in the sales tax assessment order and the computerized cash book produced before him. Accordingly, he again required the assessee to produce the books of accounts on 30.12.2009. f) On 30. 12.2009, the assessee again produced the books of accounts, which were re-examined by the Assessing Officer. He explained the alleged discrepancy in cash book page no stated in sales tax order and the cash book produced before him. In fact, there was no discrepa .....

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t is enclosed herewith as Annexure- A . g) The assessment was framed by the Assessing Officer at an income of ₹ 2, 83, 890/-. h) That, thereafter, a notice u/s 148 was issued by the Assessing Officer on 11.03.2010 requiring the assessee to file a return within 30 days from the date of service of the said notice. The true copy of the said notice is enclosed herewith as Annexure- B". i) Vide letter-dated 09.06.2010, assessee submitted that the return originally filed be treated as retur .....

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nexure- E . l) On the same date, the Assessing Officer provided the reasons to the assessee, the copy of which is enclosed herewith as Annexure- E . m) In the reasons the Assessing Officer had recorded that he had called for the bank account of assessee from Canara Bank u/s 133(6) & the same was stated to be received after 30.12.2009 i.e. after passing the assessment order. He found certain anomalies in the copy of account directly furnished by the bank and copy of account furnished by the a .....

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09 by hand to the official in pursuance to their letter-dated 24.12.2009. The true copy of the letter-dated 17.07.2010 issued by the Canara Bank is enclosed herewith as Annexure- G . p) Thereafter, assessee sought inspection of assessment on 06.08.2010 which was allowed to him. Vide letter-dated 25.08.2010, assessee requested for certified copies of certain documents which were provided to him on 31.08.2010. The true copy of the letter-dated 25.08.2010 issued by the assessee and the copy of lett .....

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e by the Assessing Officer in the order sheet. It may be presumed that the Trade Tax Department might have sent the sales tax assessment order after 21.12.2009 but before 30.12.2009 as the Assessing Officer had made a specific query with respect, to discrepancy in the page no. of cash book and had required the assessee to again produce the books of accounts on 30.12.2009. r) That, thereafter, vide letter-dated 21.09.2010, assessee filed objections to the proceedings initiated by the Assessing Of .....

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agar and it was persuaded to surrender the amount of ₹ 50 lac to avoid litigation. t) That in the meantime, the assessee discussed the matter with various legal consultants who advised to go in litigation as the very basis to initiate the proceeding u/s 148 was bad-in-law as no new information had come before the Assessing Officer to form a belief based on reasons. The information, on the basis of which the proceeding was initiated, was already before the Assessing Officer during the origi .....

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the balance amount of tax was requested to be paid on framing the assessment, from the family fund and the interest was requested to be waived. The true copy of the letter-dated 15.11.2010 issued by the assessee making conditional surrender of ₹ 50 lac is enclosed herewith as Annexure-"K". t) That the assessee made surrender despite the fact that the amount was explainable. During the statement on 14.12.2010 as well as in the letter- dated 15.11.2010, assessee has explained that .....

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9 lac each and the sixth cheque for an amount of ₹ 5 lac. The said amount was also credited and debited to the assessee's personal fund account which was duly existing in the ledger produced before the Assessing Officer during the original assessment proceeding. Assessee had also explained that a sum of ₹ 10 lac (out of ₹ 50 lac) was received by him from his father before 40 years during family arrangement and ₹ 15 lac and ₹ 25 lac (totaling to ₹ 40 lac) w .....

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by the Assessing Officer on 14.12.2010 is enclosed herewith as Annexure- L . u) That again in compliance to the proceeding, the assessee furnished the letter-dated 22.12.2010 furnishing the details required by the Assessing Officer and the case was discussed by him. The true copy of letter-dated 22.12.2010 is enclosed herewith as Annexure-"M". v) Thereafter, the Assessing Officer passed the order-dated 29.12.2010, whereby he disbelieved the surrender made by the assessee, rejected the .....

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CIT(A) who upheld the proceeding initiated by the Assessing Officer u/s 147/148 of the Act and also confirmed the addition of ₹ 50 lac made by him. CIT(A) observed that the bank statement of the assessee from the Canara Bank was before the Assessing Officer, before the completion of assessment proceeding on 30. 12.2009, however, due to remissness, on the part of the Assessing Officer, the information obtained from the bank on 24.12.2009 could not be taken cognizance. Regarding surrender of .....

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alty u/s 271(1)(c) of the Act be not levied. Assessee filed a detailed reply dated 10.05.2012 and explained that he had fulfilled all the conditions under surrender 'and paid the full tax. Therefore, no penalty could be levied. He also relied upon certain case law and submitted that the provisions of Evidence Act are not strictly applicable to the income tax proceeding as the same are not the criminal proceeding. Accordingly, he requested to drop the penalty proceeding. The true copy of the .....

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edings, anomalies were found out on comparing the bank statement supplied by the Canara Bank after passing order u/s 143(3) dated 30.12.2009 and copy of statement furnished by the assessee. ii) The assessee has neither surrendered the amount suo moto in the original assessment proceeding nor in compliance to notice u/s 148. It was only when assessee was not left except surrender of alleged concealed amount, he surrendered the amount of ₹ 50 lac. iii) Penalty proceeding was initiated only a .....

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e to the present case. vi) Assessee had concealed and furnished inaccurate particulars of income. CONTENTIONS 01) As per provisions of section 271(1)(c) of the Act, the Assessing Officer has to satisfy himself during the assessment proceeding itself that assessee has concealed the particulars of income or has furnished the inaccurate particulars of income. No such satisfaction has been arrived at by the Assessing Officer during the assessment proceeding. Satisfaction arrived at during the penalt .....

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y a continuation of assessment proceeding. Hence, Assessing Officer has to form his opinion and record his satisfaction before conclusion of assessment proceeding. A finding must be recorded that assessee has been guilty of concealment or of furnishing inaccurate particulars of income. 03) The Assessing Officer has not arrived at a requisite satisfaction during the assessment proceeding when he has merely initiated the penalty proceeding separately without observing as to whether it was a case o .....

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ed the argument of the revenue that all the facts available on record coupled with the direction by Assessing Officer to initiate the proceeding u/s 271(1)(c) of the Act in the assessment order itself leads to an inference that the requisite satisfaction was arrived at by the Assessing Officer. Hon'ble Delhi High Court held that it is the assessing authority which has to form its own opinion and record its satisfaction before initiating penalty proceeding. Merely because the penalty proceedi .....

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ontra submission of the Ld. ASG that prima facie satisfaction of the Assessing Officer need not be reflected at the stage of initiation but only at the stage of imposition of penalty is in the teeth of section 271(1)(c) of the Act. Section 271(1)(c) has to be read in consonance of section 271(1B). The presence of prima facie satisfaction for initiation of penalty proceeding was and remains a jurisdictional fact which cannot be whisked away as the provisions stands even today, i.e., post amendmen .....

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by the assessee of clause (c) of sub-section (1) of section 271 of the Act. A requirement, which is mandated by the provision itself". The above judgment is locus classicus on the interpretation of section 271 (1B) of the Act. In view of this judgment reliance placed by the Assessing Officer on section 271(1B) of the Act is incorrect when it read the said provision in an isolated manner without observing that he had not satisfied himself during the assessment proceeding qua concealment of i .....

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refore, of an additional tax. Hence penalty proceeding should be vulnerable in a case where assessment proceeding is bad in law. The present case is the glaring instance where the reassessment proceeding is not sustainable in law for the following amongst other reasons:- i) The reasons recorded by the Assessing Officer u/s 148 are incorrect when it stated that the information u/s 133(6) were called from Canara Bank but the same was not received till 30.12.2009 i.e. the date of passing the assess .....

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sment order from trade tax Department and the bank statement from Canara Bank. The entries of ₹ 50 lac were existing in the ledger, which were debited and credited to Mohd. Irshad Personal Fund Account. Thus very basis for initiating the proceeding u/s 147 of the Act was incorrect. This fact has been admitted by the CIT(A) also when he observed at page 23 of the order that the copy of bank account was furnished by Canara Bank on 24.12.2009, before completion of the assessment proceeding on .....

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ns before continuing with the assessment proceeding. Thus the procedure adopted by the Assessing Officer was contrary to the law enunciated by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (259 ITR 19) and therefore, was bad-in-law. iii) The reassessment proceeding was based on mere change of opinion and therefore, the same was. not sustainable in law in view of the judgment of Full Bench of Delhi High Court in the case of Kelvinator of India (256 ITR 1) as confirmed .....

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ar against change of opinion is an inbuilt requirement to check abuse of power. iv) The Assessing Officer has ignored the factum of existence of entries of ₹ 50 lac in the ledger of assessee maintained in the regular course of business by stating that the account namely Mohd. Irshad Personal Fund Account was not existing in the immediately preceding and subsequent assessment years. Such an observation by the Assessing Officer shows non-application of mind or the very feeble knowledge of th .....

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ot;Mohd Irshad Personal Fund Account" in the immediately preceding and subsequent year and therefore, the said account was not existing in the ledger of those years. Hence, the conclusion drawn by the Assessing Officer that the books of accounts of the assessee were fabricated is incorrect in the facts and circumstances of the case. Hence, the reassessment proceeding initiated by the Assessing Officer was not sustainable in law and therefore, any satisfaction arrived at in such proceeding f .....

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g before ITAT. v) That the information on the basis of which proceeding was initiated was already existing before the Assessing Officer during the original assessment proceeding and was considered by him. No new information came within the knowledge of Assessing Officer so as to form the belief that income in the case of assessee had escaped assessment. The Assessing Officer had duly examined the books of accounts during the original assessment proceeding and therefore, proceeding initiated on t .....

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-B and 234-C. In the said surrender assessee had also explained the source of ₹ 50 lac as ₹ 10 lac out of ₹ 12 lac received from father before 40 years in pursuance to family arrangement and ₹ 40 lac as advance money received for sale of two houses one at Charthawal and another at Muzaffarnagar. Thus assessee had explained the source of ₹ 50 lac which were duly entered into the books of accounts. Hence, provisions of explanation were not attracted to the present cas .....

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was incorrect. 06) In S V Kalyanam vs ITO (327 ITR 477), Madras High Court have held that section 69 is a deeming provision and the same cannot be extended to penalty proceeding. The Department cannot presume that there is a concealment. There must be an independent finding by the Assessing Officer that the assessee had concealed the income or had furnished inaccurate particulars of income. 07) In CIT vs Mahavir Irrigation (P) Ltd. (202 Taxmann 415), Delhi High Court have held that where assesse .....

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accounts and claimed deduction which was allowed and thereafter, there was a reassessment, imposition of penalty u/s 271(1)(c) is not justified. 09) The Assessing Officer has accepted the surrender but has not accepted the conditions subject to which surrender was made. It is a well established principle of law that admissions have to be read as a whole and in the context in which, they are made and not de hors the context. The admission of the assessee that he had no proper explanation for a c .....

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rove concealment of income by the Assessing Officer, penalty cannot be levied. Kindly see CIT vs Paripushpam (S.I.) (249 ITR 550) (MAD) CIT vs Garg Traders (253 ITR 736) (P&H) CIT vs Suresh Kumar Bansal (254 ITR 130) (P&H) CIT vs Jalaram Oil Mills (253 ITR 192) (GUJ) 11) In the following cases, it is held that admission cannot be a ground for penalty where it is made for purchasing peace with the Department CIT vs Pioneer Engineering Syndicate (188 ITR 287)(MAD) CIT vs Punjab Tyres (162 .....

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om circumstances, so as to justify the addition, but there is no positive evidence that the inferred income was actually received by the assessee, penalty cannot be justified, notwithstanding explanation 1 to section 271(1)(c) which deems concealment. 15) In CIT vs Careers Education & Infotech (P) Ltd. (336 ITR 257), Punjab & Haryana High Court have held that in every case where surrender is made, inference of concealment of income cannot be drawn u/s 58 of Evidence Act. 16) In CIT vs Gu .....

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R 125), Gujarat High Court have held where assessee s explanation is unproved but not disproved by the Assessing Officer, reliance on explanation 1 to section 271(1)(c) is not enough for levy of penalty. 18) The Assessing Officer has levied the penalty stating that there is no promissory estoppel against statute and therefore, no condition can be attached with agreed addition for surrender. It is submitted that estoppel has been held to be only a rule of evidence and not a cause of action. It is .....

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rty obliged either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation. No penalty could be imposed if the assessee was acting in honest and genuine belief in a particular manner as held by the Hon'ble Supreme Court in Hindustan Steel Limited vs State of Orissa (83 ITR 26). Penalty should not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statu .....

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he amount subject to no penal action. Hence, the penalty imposed in the present case is liable to be deleted in the interest of justice. We have also gone through the decision of the Allahabad High Court in the case of CIT Vs. Manga Ram & Sons 107 ITR 307 (All.) and that of CIT Vs. Sarankhan Siri Sugar Works 246 ITR 216 (All.). In these cases also the proposition of the law laid down by the Hon'ble High Court are that if the income is surrendered with the condition that no penalty be imp .....

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hout any compulsion. If Department has incriminating material with regard to disclosed income, disclosure is not voluntary and vice versa. K L Swamy vs CIT (Kar) 239 ITR 386 - search in third party's premises M N Rajaraman vs ACIT (ITAT, Chennai) 119 ITD 362 Simply because assessee agreed to addition of concealed income after detection thereof and filed return in response to notice u/s 148 offering additional income, assessee cannot escape from penalty u/s 271(1)(c) P C Joseph & Bros vs .....

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efore, it is observed that the disclosure made by the assessee was not voluntary and in good faith. Each case has been briefly discussed as under: i) 242 ITR 29 (Ker) CIT vs A Sreenivasa Pai In this case, assessee filed the return on 29.06.1987 for AY 1987-88 after filing the return, scrutiny notice was issued various books of accounts. The case was posted for scrutiny on 29.09.1987. When the assessee's representative appeared before the AO, the date was adjourned to the next date when sever .....

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led a revised return offering an additional income for taxation under the head "other sources". The AO initiated penalty proceeding u/s 271(1)(c) on the view that the revised return filed by the assessee admitting hire income could not be treated as voluntary as the same was filed only after the Department had started inquiries with regard to credit balances and with regard to demand draft accounts. The Tribunal cancelled the penalty. However, Kerala High Court held that the revised re .....

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declaring additional income of ₹ 54.71 lac for AY 1985-86 and ₹ 18 lac each for AY 1986-87, 1987-88 and 1988-89. He also filed revised returns for 03 years. AO regularized them by issuing notice u/s 148. Gujarat High Court have held that it was only after the detection by the Department that assessee had made disclosure. Therefore, assessee could not be stated to have voluntarily come forward to disclose income which had unintentionally been omitted from the original return of incom .....

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nalty only when he had made a disclosure by filing revised return voluntarily ending good faith. iv) 230 ITR 855 (AII) Bhairav Lal Verma vs UOI Full Bench of the Allahabad High Court in this case, have curled out the following principle: The word "voluntarily" in section 273A of the Act means out of free will without any compulsion. Voluntary disclosure of income means the disclosure of income out of free will without any compulsion/constraint. As a principle of law it cannot be held t .....

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ial with regard to the income disclosed, the disclosure is liable to be treated as voluntary even if it was made after raid/search. Observations made in this case support the case of the assessee. v) 243 ITR 818 (Ker) P C Joseph & Bros vs CIT In this case, after completion of original assessment, a search was conducted in the case of assessee. On scrutiny of books of accounts together with the seized documents, relevant to the year under consideration i.e. AY 1974-75, the AO noticed that ass .....

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g the agreed concealed income did not constitute a mitigating circumstance and penalty has been rightly levied. vi) 331 ITR 458 (All) CIT vs Rakesh Suri During the 'assessment proceeding, AO required the assessee to furnish details of sale of shares in respect of which, long term capital gain was shown. Assessee did not furnish details, his statement that shares were sold through Delhi Stock Exchange was also found to be false. On repeated inquiry, assessee surrendered the amount. AO treated .....

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assessee was false or that the assessee had concealed the income at the time of filing the original return. However, in the present case, no incriminating material was in the possession of AO to prove that the amount surrendered by the assessee was concealed income. In the assessment proceeding itself, assessee had explained that the amount of ₹ 10 lac (out of total ₹ 50 lac) was received from the father during family arrangement and ₹ 40 lac was the advance money received in .....

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y the assessee was bonafide. d) It is submitted that mere agreement to addition of income or surrender of income does not imply concealment of income. i) where the assessee failed to give satisfactory proof of certain cash credits and surrendered them for addition to the income, it was not open to the Department to impose on that basis alone penalty for concealment because the onus of proving deliberate concealment had not been discharged by the Department. CIT vs Net Ram Ram Swaroop (88 ITR 213 .....

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the explanation to section 271(1)(c) could not be levied. CIT vs Prafulla Kumar Mallik (104 ITR 648)(Ori) CIT vs Prakassam Readymade Store (140 ITR 601)(Mad) iii) Mere addition to income at the instance of the assessee would not warrant a finding of concealment and a consequent levy of penalty u/s 271(1)(c) of the Act. CIT vs S Sankaran (241 ITR 825)(Mad) iv) Where the assessee had agreed for conclusion of cash credits as income, it was held that there was no admission that cash credits represe .....

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rotected litigation and in order to buy peace. Mere addition to income agreed to by the assessee is not proof of concealment and penalty cannot be imposed. The Department must establish that the amount is the assessee s income of the relevant year. Mere admission does not justify penalty even in the light of the explanation to section 271(1)(c) of the Act. f) The doctrine of promissory estoppel is not applicable to the present case at all. In fact, the Ld. AO has not understood this principle. T .....

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ld inequitable to allow him to do so having regard to the dealings which have taken place between the parties. What is necessary for the principle to apply to a given case is only that the promise should have altered his position in reliance on the promise. The party asserting the estoppel must have acted upon the assurance given to him must have relied upon the representations made to him. The alteration of position by the party is the only indispensable requirement of the doctrine. In the pres .....

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o. Ltd. vs State of Uttar Pradesh (118 ITR 326). In Moti Lal Padam Pat's case, Hon'ble Supreme Court have held that this doctrine can be invoked against the Govt. as well. In this case, on the basis of an announcement in a newspaper that the state of UP had decided to grant exemption from sales tax for a period of 03 years to all new industrial units in the state. This announcement was confirmed by the assessee from the Director of industry as well by way of writing a letter. Thereupon t .....

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omise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Govt. would be held bound by the promisee and the promise would be enforceable against the Govt. at the instance of the promisee, notwithstanding that there is not consideration for the promise and the promise is not recorded in a form of a formal contract as required by Article 299 of the Constitution. Even this principle has been explained by the Ker .....

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d that the appeal may kindly be allowed considering the submissions and legal position as explained by appellant...... " 9. The ld. CIT(A) after considering the submissions of the assessee observed that the AO had imposed the penalty u/s 271(1)(c) of the Act on the ground that the surrender made at ₹ 50,00,000/- was made by the assessee under compelling circumstances when the assessee had no other choice and the conditions laid down for surrender were rejected by the AO. The ld. CIT(A .....

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ent of the assessee that satisfaction of concealment was not recorded by the AO, the ld. CIT(A) observed that the AO in his last sentence of the assessment order has mentioned that penalty notice u/s 271(1)(c) of the Act is being issued separately . The ld. CIT(A) was of the view that the initiation of penalty proceedings coupled with the observations made by the AO, in the body of assessment order left no scope for any doubt that the satisfaction for initiation of penalty was not recorded in th .....

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. The ld. CIT(A) further observed that the AO was satisfied and drew unequivocal inference that the assessee had furnished fabricated documents, made false statement and hence concealed the income by furnishing inaccurate particulars of his income and initiated the penalty proceedings. The ld. CIT(A) also observed that even if the AO had not disposed off the objections of the assessee for reopening, the same had lost the relevance particularly in view of the fact that the assessee during the cou .....

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see only when the AO has taken one of permissible views at the time of assessment proceedings but a wrong application of law cannot be held as permissible view and that can always be changed for appreciating law. The ld. CIT(A) was of the view that the reassessment was based on non-consideration of copy of bank account with Canara Bank, Muzaffarnagar, the said lapse on the part of AO was corrected by taking remedial action u/s 147 of the Act, therefore, the contention of the assessee for change .....

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; 50 lac regarding which the assessee had no explanation at all and the surrender of ₹ 50 lac was neither made at the time of original assessment nor at the time of filing of return u/s 148 of the Act but only when the copy of bank statement as furnished by the aforesaid bank was confronted to the assessee. Thus, surrender of income was not voluntarily made but was made after detection by the department and after the assessee had no escape route. Therefore, the proceeding offered by the as .....

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nalty. The ld. CIT(A) was of the view that if the department had incriminating material with regard to addition of concealed income, disclosure was not voluntarily and vice versa and simply because the assessee agreed to the addition of concealed income after detection thereof and surrendering the undisclosed income at the time of reassessment proceedings, the assessee cannot escape from penalty u/s 271(1)(c) of the Act. The reliance was placed on the following case laws: Ø CIT Vs Rakesh .....

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50,00,000/- but the surrender was neither voluntarily nor with clean hands. The ld. CIT(A) also mentioned that the claim of the assessee that amount of ₹ 10,00,000/- was received in family settlement made 40 years back, had no force and that the advances totaling to ₹ 40,00,000/- were received in April, 2006 for sale of house at Charthwal and Muzaffarnagar was not acceptable, since the assessee showed his inability to disclose the names of such persons on the ground that there was Ba .....

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6 ITR 568 (Del) Ø Jiten & Co. Vs STO 39 STC 308 (Del) Ø Som Nath Oil Mills 214 ITR 32 (Guj) Ø Jeevan Lal Shah 205 ITR 244 (SC) Ø A. M. Shah & Company 238 ITR 415 (Guj) Ø Ram Sewak Ram Chandra 151 CTR 294 (All) Ø K. N. Singh 150 CTR 448 (MP) Ø Balwant Rai & Co. 274 ITR 269 (All) Ø Rohini Dairy Farm 244 ITR 427 (Mad.) Ø Gurbachan lal 250 ITR 157 (Del) 11. Now the assessee is in appeal. The ld. Counsel for the assessee reite .....

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sfaction to be arrived at during the assessment proceedings. It was stated that the assessee surrendered ₹ 50,00,000/- himself during reassessment proceedings, the said surrender was bonafide and made with clean hands to avoid any dispute in future, to avoid any litigation and to purchase peace of mind subject to no penal action. It was emphasized that the assessee handed over the cheque of ₹ 10 lac towards tax liability, in the said surrender of ₹ 50 lac the assessee had also .....

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; 50 lac were existing in the bank account of the assessee and also in the ledger maintained for the assessment relevant year and thus the material relevant for the assessment was already before the AO during the original assessment proceeding and even bank account sent by the Canara Bank was available to the AO before passing of original assessment order. Therefore, the very basis for imposing the penalty that the bank account was not before the AO on 30.12.2009 was incorrect and therefore, the .....

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TR 568 (Del) Ø D M Manasvi 86 ITR 557 (SC) Ø S V Angidi Chettiar 44 ITR 739 (SC) Ø Ms Madhushree Gupta Vs UOI 183 Taxmann 100 (Del) 12. The ld. Counsel for the assessee further submitted that the assessee duly objected to the initiation of reassessment proceedings vide letter dated 21.09.2010 and the AO had not met out those objections before continuing the reassessment proceedings. Thus, the procedure adopted by the AO was contrary to the law laid down by the Hon ble Suprem .....

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AO during the original assessment proceedings and considered by him, therefore, the proceedings initiated on the basis of change of opinion was bad-in-law. The reliance was placed on the following case laws: Ø CIT VS Usha International Limited 348 ITR 485 (FB) (Del) Ø S V Kalyanam Vs ITO 327 ITR 477 (Mad) Ø CIT Vs Mahavir Irrigation (P) Ltd. 202 Taxmann 415 (Del) Ø CIT Vs Rajdev Singh & Company 202 Taxmann 433 (Del) 13. It was stated that the AO accepted the surre .....

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d) ØCIT Vs Garg Trader 253 ITR 736 (P&H) ØCIT Vs Suresh Kumar Bansal 254 ITR 130 (P&H) ØCIT Vs Jalaram Oil Mills 253 ITR 192 (Guj) ØCIT Vs Pioneer Engineering Syndicate 188 ITR 287 (Mad) ØCIT Vs Punjab Tyres 162 ITR 517 (MP) ØCIT VS Saran Khandsari Sugar Works 246 ITR 216 (All) ØCIT Mansa Ram & Sons 106 ITR 307 (All) ØCIT Vs Careers Education & Infotech (P) Ltd. 336 ITR 257 (P&H) ØCIT Vs Gujamgadi (M.M.) 290 ITR 1 .....

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ustained by the ld. CIT(A) was liable to be deleted in the interest of justice. The reliance was placed on the following case laws: Ø CIT Vs Vatika Construction Pvt. Ltd. (ITA No. 1246/2010 decided on 11.10.2012)(Del) Ø CIT Vs Ashok Taker (2008) 170 Taxmann 471 (Del) Ø CIT-I Vs D&H Secheron Electrodes Ltd. (2006) 157 Taxmann 463 (MP) Ø CIT Vs KM Sonali Jain (2012) 211 Taxmann 175 (All) (Mag) Ø ITO Vs Rakesh Kumar Gupta (2012) 21 Taxmann.com 323 (Del) &Oslas .....

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not necessary where any amount is added for disallowance in computing the total income or loss of the assessee in any order of the assessment or reassessment and said order contends a direction for initiation of penalty proceedings under clause (c) of subsection (1) such an order of assessment or reassessment shall be deemed to constitute satisfaction of the AO for initiation of the penalty proceedings under the clause (c) of section 271 (1) of the Act. It was further submitted that since the A .....

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, the AO had made an addition of ₹ 7,000 only, however the case was reopened on the basis that the assessee deposited of ₹ 50 lac in his bank account. During the course of assessment proceedings, the assessee explained the source of the deposit which was ₹ 10 lac claimed to have been received from his father during family arrangements and ₹ 40 lac on account of advance money received in April 2006 for sale of two houses. However, the assessee during the course of assessme .....

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penalty of ₹ 16,88,730/- u/s 271(1)(c) of the Act by considering the surrendered amount of ₹ 50 lac as a concealed income of the assessee. It is well settled that assessment proceedings and the penalty proceedings are two separate and distinct proceedings and even when some addition is made it does not ipso facto absolve the revenue of its burden of proving that the amount added was concealed income of the assessee. It is not in dispute that for levying the penalty u/s 271(1)(c) of .....

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had concealed the income by furnishing inaccurate particulars of his income. However, there is no positive satisfaction that the assessee concealed income or furnished inaccurate particulars of income. 17. On a similar issue the Hon ble Jurisdictional High Court in the case of Madhushree Gupta Vs UOI 183 Taxmann 100 (supra) held as under: "15.6 - As indicated hereinabove the position is no different post- amendment. The contra submission of the Ld. ASG that prima facie satisfaction of the A .....

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ction 271(1B) is accepted then, in our view, the impugned provision (section 271(1B)) will fall foul of article 14 of the Constitution as it will then be impregnated with the vice of arbitrariness. The Assessing Officer would in such a situation be in a position to pick a case for initiation of penalty merely because there is an addition or disallowance without arriving at a prima facie satisfaction with respect to infraction by the assessee of clause (c) of sub-section (1) of section 271 of the .....

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y jurisdiction to initiate the penalty proceedings is not conferred on the assessing authority by reference to clause (c) of sub-section (1) of section 271 of the Income Tax Act, 1961. A bare reading of the provisions of section 271 and the law laid down by the Supreme Court makes it clear that, it is the assessing authority who has to form his own opinion and record his satisfaction before initiating the penalty proceedings. Merely because the penalty proceedings have been initiated it cannot b .....

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u/s 271(1)(c) of the Act was not leviable. In the present case, the AO had not arrived at a requisite satisfaction during the assessment proceedings, he simply initiated the penalty proceedings without observing as to whether it was a case of concealment of income or furnishing of inaccurate particulars of income, moreover, when the original assessment was framed u/s 143(3) of the Act, copy of bank account issued by Canara Bank was available to the AO which he later on had considered as fabricat .....

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on account of sale of two houses at Charthawal and Muzaffarnagar. The another amount of ₹ 10 lac was claimed to have been received from the father during the family arrangements in the earlier years, but the assessee was unable to produce the parties from whom the advances were received. He, therefore, surrendered the amount of ₹ 50 lac voluntarily and paid the tax on the said surrendered amount subject to no penal action. In the instant case the assessee himself agreed for surrende .....

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