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2015 (11) TMI 1012

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..... of the facts and the aforesaid documentary evidence, we are of the considered opinion that it is a fit case, where the penalty has to be deleted, thus, we find merit in the appeals of the assessee and direct the ld. Assessing Officer to delete the penalty imposed u/s 271(1)(c) of the Act, consequently, the appeals of the assessee are allowed. - Decided in favour of assessee. - ITA NOs.2805 to 2809/Mum/2015 - - - Dated:- 7-10-2015 - Shri Joginder Singh, Judicial Member, and Shri R.C.Sharma, Accountant Member For The Assessee : Shri Dilip V. Lakhani For The Revenue : Shri Asgar Zain Sr.A.R DR ORDER Per Joginder Singh (Judicial Member) This bunch of five appeals is by the assessee for Assessment years 2006-07 to 2010-11 against the respective impugned orders all dated 12/02/2015 of the ld. First Appellate Authority, Mumbai. The only ground raised in these appeals pertains to confirmation of imposition of penalty u/s 271(1)(c) of the Act on the respective amounts as contained in the respective appeals. 2. During hearing of these appeals, we have heard Shri Dilip V. Lakhani, ld. counsel for the assessee, and Shri Asgar Zain V.P., ld. DR. The crux of ar .....

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..... of Ispat Group on 30/11/2010, wherein, as per the department, certain incriminating documents were found. Pursuant to the search, the assessee vide letter dated 30/05/2011, offered income to the extent of ₹ 10,95,76,000/-, by filing a revised returns, on account of seizure of incriminating document and paid taxes thereupon on 30th and 31st March, 2011 for Assessment Years 2005-06 to A.Y. 2011-12. Tax of ₹ 14,49,690/- was paid for A.Y. 2006-07 on 30/03/2011. Subsequently, assessee filed another return of income on 06/09/2012 showing therein total income of ₹ 46,22,000/- which was beyond the time prescribed, for filing a valid return, u/s 139(5) of the Act. As per the Revenue, since, there was escapement of income (i.e. difference between the original return and the revised return), the assessment for A.Y. 2006-07 was reopened u/s 147 of the Act with the issuance of notice u/s 148 of the Act dated 20/12/2012. The notice was served upon the assessee on 21/12/2012. The additional income of ₹ 46,22,000/- was not offered while filing the original return u/s 139(1) of the Act. In view of these facts, penalty proceedings u/s 271(1)(c) of the Act were initiated with .....

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..... s such no Income has actually been evaded so far. However, to buy peace and to fully co-operate with the departments in connection with the search proceedings, above income have been offered for taxation. d. This is with clear cut understanding that no more explanation or enquiries would be necessary by the department after this offer of income of ₹ 32.63 Cr approx. Is made only in connection with the said seized material, ie. Annexure 2 from Delhi office of Ispat Industries Ltd and Annexure A-I to A-7 seized from residence of Mr. T.P. Subramanian. e. This is also with the understanding that no penal proceedings would be initiated in connection with seized material referred above or relevant income offered as above. f. This additional income of ₹ 32.63 Cr. approx. is offered under the head Income from business and profession as residue item as other' business income. 6. The above facts clearly show that our client had offered the income of ₹ 32.63 crores spread over seven assessment years voluntarily and clearly stating in the letter dated 30/05/2011 that our client has not evaded any income and only in order to buy peace and to coop .....

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..... 2007-08 wherein the Learned Assessing Officer in para 5 has stated that the assessee did not offer the additional income in the original return filed u/s 139(1) of Income Tax Act,1961 and it is only on consequent to the search seizure action the assessee has disclosed the undisclosed income. Had the search seizure action had not been conducted, the undisclosed income would not have been unearthed. We submit that the basis of coming to the satisfaction itself is on a wrong interpretation of facts. First of all there is no search on our client. Secondly even during the search on Ispat Industries Ltd no material or evidence is found which could lead to a conclusion that undisclosed income belonging to our client is found. The question of finding of the undisclosed income does not arise at all on the factual aspect that not a single piece of paper belonging to our client was found during the course of search on Ispat Industries Ltd. When the foundation on which the satisfaction is arrived by the Learned Assessing Officer at the time of passing the reassessment order itself is contrary to the facts of the case and especially when penalty proceedings are quasi criminal proceedings, .....

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..... r client. We submit that whenever a conditional offer is made by the assessee and if the offer is accepted in totality then no penalty u/s 271(1)(c) can be levied. We rely upon decision in case of Giriraj Gupta vs ITO (2007) 162 Taxmann pg.81, Delhi ITAT wherein the Hon'ble Court has held that on a conditional offer of income the penalty u/s 271(1)(c) cannot be levied. The ratio of this decision is directly applicable on the facts of the case. 13. We also rely upon the decision of Hon'ble Punjab and Haryana High Court in case of CIT vs Suraj Ban reported in 249 ITR pg.481 wherein it has been held that if the assessee has offered higher income and has given an explanation that higher income is offered to buy peace and avoid litigation, then no penalty u/s 271(1)(c) can be levied. The facts of the case before you are much stronger where even there is no evidence of concealment of income and the income is offered to buy peace and avoid litigation. The ratio of this decision is directly applicable on the facts of the case. 14. Based on above factual legal matrix, we respectfully submit that the penalty proceedings may be dropped. 2.6. If the aforesaid letter .....

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..... held that no penalty could be levied for concealment (see [2000] 241 ITR 124). The Department preferred appeals to the Supreme Court. The Supreme Court dismissed the appeals holding that no interference with the order of the High Court was called for. The Hon ble Apex Court affirmed the decision of Hon ble M.P. High Court in the aforesaid case (241 ITR 124), thus, it can be said that the aforementioned judicial reasoning squarely supports the case of the assessee, rather it can be said that in the present case, the search action was taken on Ispat Group of cases and not on the assessee, therefore, these appeals of the assessee are on much stronger footing. 2.7. Now, we shall analyzed certain other cases, wherein, the Hon ble Courts has taken a view with respect to penalty u/s 271(1)(c) of the Act. In CIT vs Kiran Company (1996) 217 ITR 326,329 (Bombay), it was held that no penalty could be imposed on the assessee merely on the basis of offer of settlement. The ratio laid down in Akshay Bhandar vs CIT (220 ITR 325, 332,333)(Gauh) holding that penalty u/s 271(1)(c) of the Act cannot be sustained on the basis of statement recorded in different proceeding, supports the case .....

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..... consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the Legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. 2.9. If the aforesaid judicial pronouncements are kept in juxtaposition with the facts of the present appeal and the letter of the assessee dated 31/08/2013 (reproduced in preceding para of this order) it is evident that the revised positive income was filed by the assessee, firstly to buy peace and to avoid litigation with the department and secondly with a clear understanding that no penal proceedings will be initiated, therefore, by following aforesaid judicial pronouncements, and further the assessee has already paid taxes to the tune of ₹ 10,95,21,288/-, the interest of Revenue is already safeguarded. In para 5 of the letter dated 31/08/2013 (reproduced in earlier para) mentions about letters dated 24/05/2011 and 30/05/2011, addressed to the Dy. Director of Income Tax (Intelligence), New Delhi, speaks about personal discussi .....

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