TMI Blog2015 (12) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable in the year in question. AO has held that the surrender is not acceptable and chose to add it u/s 41(1) of the Act. Thus technically even the surrender is not accepted and unilateral cessation of liable is assumed ignoring the plea that in subsequent years trading liability amounts were paid. The details about trading liabilities and transactions were reflected in the accounting statements which were part of the return of income. Hon’ble Supreme Court in Reliance Petro Products case (2010 (3) TMI 80 - SUPREME COURT ) has held that if the relevant information is filed with the return of income in that case any variation in the claims of the assesse will not entail penalty. This judgment also supports the case of the assesse, in view thereof also the penalty in this case can not be imposed by merely referring to the alleged surrender and without considering the explanation. Thus, in consideration of entirety of facts, circumstances and case laws as relied on by assesse, we delete the penalty. - Decided in favour of assessee. - ITA No. 672/JP/2011 - - - Dated:- 31-10-2014 - SHRI R.P. TOLANI AND SHRI T.R. MEENA For the Petitioner : Shri Manish Agarwal F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Shiv Traders 2,75,771/- - - 2,75,771/- 4. Durga Iron Works, Haldwani 45.262/- - - 45,262/- 5. M/s. Rajesh Kumar Rajendra Kumar, Taraori (Haryana) 37,600/- - 37,600/- - 6. M/s. Lovely Marbles, Kishangarh 73,911/- - 73,911/- - 7. M/s. Deen Dayal Marble Traders, Kishangarh 1,12,000/- - - 1,12,000/- 8. M/s. Kumar Marble Udyog, Kishangarh - 1,20,000/-- - 9. M/s. Bangar Marble, Kishangarh - 1,25,000/- - Total 18,34,178/- 2,45,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the merits of explanation and glaring facts that maximum credit amounts were opening balances; and rejecting the surrender as not voluntary held that assessee concealed income and furnished inaccurate particulars imposed the impugned penalty. 2.2 Aggrieved, the assessee preferred first appeal before the ld. CIT(A) where it was contended that assessee s surrender was factually rejected by the AO himself. No independent inquiry during the course of penalty proceedings was made. The AO though rejected the surrender however the penalty was imposed solely only relying on the surrendered amount. The Assessee pleaded that assessment proceedings and penalty proceedings are distinct and for imposition of penalty proper enquiries should have been made and there was no justification to rely on the rejected surrender penalty for imposing merely because AO had power to levy it. It was submitted that though the finding of the assessment orders may be relevant as evidence in penalty proceedings but they by themselves cannot be the foundation for imposing the penalty. Hon ble Apex court in the case of Eilly Lilly Company reported in 312 ITR 225 has held that the penalty proceedings is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drilal Chaturbhuj 265 ITR 329(Raj) (vi) Penalty proceedings are separate and distinct from assessment proceedings and mere fact that income has been offered for taxation will not tantamount to admission of furnishing inaccurate particulars without properly examining the explanation and circumstances in this behalf. (vii) All the relevant particulars were furnished along with the return of income, parties are old and opening balances have been accepted in preceding year. With all these undisputed facts on record, imposition of penalty without any enquiry in independent proceedings is untenable. Reliance is placed on Hon ble Supreme court judgment in the case of Reliance Petro Products 322 ITR 158. (viii) The assessee has surrendered the amount during the course of assessment proceedings only to buy peace of mind and shortage of time span during which the justification was to be filed and due tax upon such amount was also deposited by the assessee. Thus, the assessee due to the time barring limit was very close do not have sufficient time to collect the details of the parties, therefore in order to avoid prolonged litigation and to buy the peace of mind had accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fate of assessment and penalty proceeding would have been in relevant year and not in this year. Thus from correct perspective the impugned additions have been made in wrong year and penalty also has been imposed in wrong year. Assessee honored her commitment by accepting the assessment it does not mean that penalty will be automatically imposed without considering these crucial aspects. Though not raised in quantum proceedings assessee has a statutory right to raise the plea for addition in correct year of taxability as well as imposition of penalty. Therefore, the penalty has been imposed without appreciating the relevant issues properly. Sec.271(1) obliges the AO to consider assessee s reply in objective manner along with facts, circumstances and law and thereafter has to arrive at a reasoned and speaking conclusion that inaccurate particulars were filed or income was concealed. In this case the assesses explanation has been summarily discarded and relying on merely the surrender which is also not accepted on face value by AO, the penalty has been imposed. Assessee has demonstrated that additions and penalty were not possible in AY 2007- 08 as on face of it amounts were opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount has been assessed as income and (ii) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation 1 to section 271(1)(c) has no bearing on factor No. 1 but has a bearing only on factor No. 2. The explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. If the assessee gives an explanation which is unproved but no dis-proved i.e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee s case is false, the explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. (3) Hon ble Apex court in the case of Eilly Lilly Company reported in 312 ITR 225 has held that the penalty proceedings is not an automatic or mandatory fallout of the addition made during the assessment proceedings, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee are as under:- 170 Taxman 471 CIT Vs. Ashok Taker (Delhi) Penalty For concealment of income: - Assessment year 1998-99 During assessment proceedings, assessee surrendered certain amount for taxation and submitted that same was done in order to buy peace Assessing Officer added back said amount to income of assessee and also initiated penalty proceedings against him under section 271(1)(c) Commissioner (Appeals) found that besides factum of surrender of income by assessee, Assessing Officer had failed to bring any other material on record to show that surrendered income was concealed income and, therefore, initiation of penalty proceedings was not warranted in law Tribunal upheld said order Whether order of Tribunal was to be upheld Held, yes. 300 ITR 40 V.V. Projects and Investments Pvt. Ltd. Vs. Dy. CIT (2008) (AP) Penalty Revised return to buy peace Penalty deleted S. 271(1)(c) The declaration of income made by the assessee company in the revised return and the explanation that it had done so to buy peace with the Department and to avoid protracted litigation was accepted by the Assessing Officer. The assessment was completed accepting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... small trader, doing halwai business--Net profit declared very low--Estimated higher assessment made by ITO accepted by assessee to avoid disputes by way of appeals, penalties, etc.--Tribunal finding that such books of account as were possible or practicable in such business was maintained--No manipulation or other indication of concealment of income pointed out by Department--Cooperation extended in completing assessment does not amount to confession of concealment of income--Levy of penalty not valid--Income-tax Act, 1961, s. 271(1)(c). 308 ITR 33 (AT) Star International P. Ltd. v. Assistant Commissioner of Income-tax (Lucknow) Penalty--Concealment of income or furnishing of inaccurate particulars-- Commission paid to artisans on sale of machines by bearer cheque--Nothing on record to show claim bogus or that money on cheques did not go to artisans--Assessing Officer imposing penalty based on presumption and inference--Not proper--Levy of penalty to be set aside--Income-tax Act, 1961, s. 271(1)(c). 251 ITR 9 (SC) Commissioner of Income-tax v. Suresh Chandra Mittal Penalty--Concealment of income--Assessee initially filing returns with meagre income--Filing revised returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in assessment the assessee can take fresh pleas in the penalty proceedings which by settled law are distinct and separate. Assessee can make fresh submissions and lead fresh evidence. AO can take fresh investigations on the basis of new pleas and material. Thus when surrendered is technically rejected and assessee gives reasonable explanation, penalty can be imposed not on the sole basis of alleged refused surrender. AO has a duty to consider the material and submission of the assessee and decide whether income on the basis of these pleas was assessable in the year in question. iii. AO has held that the surrender is not acceptable and chose to add it u/s 41(1) of the Act. Thus technically even the surrender is not accepted and unilateral cessation of liable is assumed ignoring the plea that in subsequent years trading liability amounts were paid iv. The Mak data judgment relied by ld DR also holds that penalty cannot be deleted merely holding that assesses voluntarily surrendered the income. There is no such immunity and it is the explanation which should be considered for penalty. In that case assessee did not offer any explanation except a specious plea of voluntary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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