TMI Blog2012 (10) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... is as under:- A.Y. Gross Receipts Net Profit N.P. Rate Depreciation Net Profit N.P. Rate After Depreciation Before depreciation 2005-06 3,57,55,837 19,35,555 5.41% 51,49,096 70,82,654 19.81% 2006-07 6,46,13,431 52,67,354 8.15% 40,92,920 93,60,274 14.49% 2007-08 10,48,70,987 65,42,991 6.24% 56,89,817 1,22,32,808 11.66% (iii) The assessee is regularly assessed to tax under section 143(3). In A.Y. 2005-06, AO after rejecting the books of accounts, made trading addition of ₹ 4 lacs (PB 68-71). In A.Y. 2006-07, AO made trading addition of ₹ 2 lacs (PB 64-67). (iv) The assessment for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also on some other decisions. It is thus contended that the surrender is suo motto to buy peace of mind therefore no penalty be imposed. (ix) The AO however imposed the penalty by holding that the income was surrendered by the assessee on the basis of highly incriminating account books found/ impounded, facts and state of affairs noticed by the tax authorities and on being cornered by the department. This cannot be said to be voluntary or suo motto action of the assessee. Accordingly, AO held that assessee is guilty of furnishing of inaccurate particulars of income. He, therefore, imposed penalty of ₹ 50,77,800/- on amount of ₹ 1,50,85,500/- which includes disallowance of claim of deduction u/s 80G. Submission- (i) From the facts stated above, it can be noted that surrender made by the assessee out of unpaid sundry creditors and unpaid salary/ bonus/ security deposit to staff as on 31.03.2007 is on adhoc basis without reference to any specific creditor/ employee. The total outstanding creditor/ amount payable to the employee as on 31.03.2007 was ₹ 3,81,54,566/- out of which assessee initially surrendered ₹ 2 crores but later on reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o surrender the income. This is factually incorrect. In survey no incriminating books of accounts were found. These are the same books of accounts which were produced by the assessee before the assessing officer in course of the assessment proceedings. It is from these books of accounts only that the assessee initially surrendered ₹ 2 crores out of unpaid creditors/ salary but reduced it to ₹ 1.50 crore vide letter dated 10.12.09. This reduced surrender is accepted. Thus, the AO has no material to establish that unpaid amount of the creditor/ employee at the end of the year is bogus/ fictious. The AO has simply relied on the surrender made by the assessee. Such surrender made by the assessee, therefore cannot be held to be the income for which inaccurate particulars has been furnished. (iv) In various cases decided by the courts, the principle laid down is that unless concrete material is found that assessee has furnished inaccurate particulars of income or concealed his income and the explanation given by him is found to be false, unsubstantiated, unplausible and malafide, no penalty can be imposed even if assessee has made surrender in survey/ assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be considered afresh from an angle different from assessment. It being not a case where penalty was imposed for breach of commercial statute where existence of bona fide may not be of much importance and also not a case where penalty was mandatorily imposable, penalty under s. 271(1)(c) was not called for. In the present case also, assessee filed the detailed list of sundry creditors and ledger account of bonus payable, salary payable, unpaid salary of staff and security deposits from employees but surrendered ₹ 1.5 crores out of the same in the revised return only due to its incapacity to produce the proper voucher for the expenses incurred. The AO simply relied on the surrender made by the assessee without pointing out any specific voucher which is unverifiable/bogus/fictious. The assessee also explained the reasons for outstanding liabilities. This explanation was not found to be false or malafide. In these circumstances, on the amount surrendered suo motto, to buy peace of mind, penalty can not be imposed. (v) A glance at the provisions of section 271(1)(c) suggests that in order to be covered, there has to be concealment of the particulars of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nonsubstantiation of explanation furnished could lead to addition but can not be said to justify the imposition of penalty u/s 271(1)(c). Dilip Yeshwant Oak Vs. ACIT 55 DTR 113 (Pune B ) (2011) The assessee is engaged in conducting coaching classes. It filed its original return of income on 19.09.2002. An action u/s 133A was undertaken by the AO in the premises of the assessee on 13.02.2004. During the survey action, certain discrepancies were found. To cover up the same, assessee offered an additional income of ₹ 7 lacs in the statement recorded under oath at the time of survey. The return was subsequently revised on 09.03.2004 offering additional income of ₹ 12,82,260/- which was stated to be invested in fixed deposits with various banks. Scrutiny assessment was completed the AO accepted the income returned in the revised return but initiated penalty proceedings by observing that the consequent disclosure of additional income of ₹ 7 lacs its subsequent revision offering additional income of ₹ 12,82,260/- is the outcome of survey operations, thereby, concealing the particulars of income furnishing inaccurate particulars. It was held that no incrimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent must be proved independently. Unless the concealment is so proved, penalty cannot be imposed. Sir Shadilal Sugar and General Mills Ltd. Vs CIT (1987) 168 ITR 705 (SC) It was held that from the assessee agreeing to additions to his income it does not follow that amount agreed to be added was concealed income liable for penalty. CIT Vs. Ratanaswamy (C.J) 223 ITR 5 It was held that where assessee agreed for addition and department did not bring on record any other material to establish that there was concealment, no penalty was exigible u/s 271(1)(C). Sant Das Nihal Chand Vs. CIT (1996) 135 CTR 174 (Raj.) It was held that mere agreement by assessee to pay tax does not amounts to concealment. Navnitlal Pochalal Vs. CIT(1995) 213 ITR 69 (Guj.) It was held that penalty cannot be levied in absence of any material on record to prove that the amount of agreed addition was income of assessee for the concerned year. M.George Bros. Vs. CIT (1986) 160 ITR 511 (Ker) It was held that penalty can t be imposed only on the basis of surrender of income, positive facts regarding concealment have to be proved. Thus, where the original return was filed on estimate basis and the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in para 4.3 at pages 11 12 which are as under :- 4.3 I have gone through the penalty order as well as submission of the assessee and case relied upon, the assessee originally surrendered ₹ 2 crore which was finally revised in computation of income at ₹ 1.5 Crore on adhoc basis without reference to any specific creditor/employee. The list of creditor of ₹ 1.5 Crore was not identified by the AO. Further, this liability paid by the assessee subsequently as the old items of the installation has to be deposited with JVVNL. The JVVNL also releases the payment after verifying the inventory. The payments to either creditor or the employee were made subsequently when payment received from JVVNL .The assessee has filed a liability chart of unpaid salary of staff, SD deposited from the employees, bonus payable and salary payable during the course of appellate proceedings. On verification of this chart it is found that the assessee has paid the liability subsequently. The adhoc disclosure was made to by peace and was not concealed income of the assessee or in respect of inaccurate particulars. The assessee had admitted the additional income during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X
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