TMI Blog2006 (3) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has supported the order of ld. CIT(A) and no other relief is sought. 4. The relevant facts of the issue under consideration in brief are that the assessee, an individual filed his original return of income on 31-8-1995 declaring net income at ₹ 2,71,470. In the return so filed, the assessee had declared receipt of agricultural income at ₹ 9,61,935 in Part G of the return. Subsequently the agricultural income was offered for taxation by treating it as income from other sources. During assessment proceedings the Assessing Officer proceeded to make inquiries regarding earning of agricultural income. The assessee stated that he had already offered agricultural income for taxation for the reason that relevant evidence was misplaced during the course of search carried out by the department. The Assessing Officer doubted this claim for the reasons that he was having information that a large number of persons had claimed receipt of agricultural income but paid normal tax on such income after investigations were initiated by the Investigation Wing. Therefore, he pursued with his inquiries. The assessee claimed to have received agricultural income through commission agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrendered voluntarily in all the cases except for the case of assessee and his son. It was further stated that in none of other cases, even penalty proceedings were initiated as the Assessing Officers assessing such persons were satisfied that income so surrendered was out of free will and before any concealment was detected or established. It was further stated that alike should be treated alike or in the same manner and if penalty for tax was not exigible in other cases, no such penalty was justified in the case of the assessee. It was emphasized that agricultural income was surrendered for tax voluntarily and the ADI had never asked the assessee any question about earning of agricultural income although inquiries were initiated before the agricultural income was offered for tax by the assessee. Reference was made to the proceedings before the ADI and reproduced at page 4 of penalty order. Specific attention was also drawn to the summons dated 9-5-1996 issued by the ADI requiring the assessee to furnish details of sources of income for the relevant year. In response thereto, the assessee furnished a copy of the computation of income submitted along with the return. Thereafter th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antiate his case. It was argued that there was no need to furnish evidence to support the income offered for tax and if the Assessing Officer doubted the correctness of income offered for tax, he was required to make out a case against the assessee which could only have been done by rejecting the offer of surrender, by making out an independent case and that the inability on the part of the assessee to lead evidence was not sufficient to levy the penalty for concealment. It was further stated that no penalty could be levied without making a case that the assessee had not either earned any agricultural income or that the assessee had concealed the particulars of taxable income. It was emphasized that at no stage, the assessee had tried to conceal any particulars of receipt of agricultural income which was declared in the relevant column of return. For the purposes of earning this income, the assessee had made withdrawals from his personal account, as such withdrawals were also disclosed. It was further stated that it was only when the assessee realized that the connected evidence was not available to substantial the earning of agricultural income, claim was surrendered and necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation Wing would be able to find actual state of affairs and because of that fear the assessee had come out with the surrender of agricultural income so, the income surrendered was under pressure and not voluntarily. As regards to the case laws relied on by the assessee, the Assessing Officer asserted that in assessee s case it had independently been proved that he did not enjoy any agricultural income which was claimed to be exempt from tax. It was stated that to claim the agricultural income there had to be agricultural land for growing crops and it was primary duty of the assessee to prove the existenace of such land and if this was not discharged the conclusion could be drawn that there was neither any agricultural land nor agricultural income. It was emphasized that the assessee could not specify the location of agricultural land because it was only stated that the land was situated in the State of U.P and if the land was situated in U.P how could the agricultural produce be sold in Delhi and even more the assessee did not know what agricultural crop was produced and also could not clarify as to how agricultural produce was sold in Delhi while the land was situated in U.P w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee was distinguishable. Ld. CIT(A) pointed out the assessee had also claimed to have received agricultural income through commission agents as was the case with the other persons. The drafts received from the commission agents were deposited in the bank accounts and all those persons offered agricultural income for tax after initiation of inquiries by the ADI (Inv.) and if that be so, the case of the assessee did not warrant a different treatment. According to the ld. CIT(A), penalties should have either be levied in all the cases and since the Assessing Officer admitted that penalty had been levied only in the case of the assessee and his son which goes against the principle of equitable justice. Ld. CIT(A) further mentioned that the Assessing Officer had relied on the investigations carried on by the Investigation Wing but there was no evidence with the officers carrying on the investigations to conclusively prove that no such income was earned, in fact, at no point of time such evidence was brought on record and this was the reason that made Investigation Wing to approach the concerned assessees very cautiously. The ld. CIT(A) categorically stated that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... war Ahmad Shamshi [1992] 195 ITR 680 (All.) wherein it had been held that unless there was fraud or gross or wilful neglect on the part of the assessee, no penalty could be levied. According to him the Assessing Officer was required to establish that the assessee concealed particulars of his taxable income. He further observed that the Assessing Officer could make his case by starting inquiries from the commission agent whose name and addresses were known to him and that the records maintained by the commission agent would have disclosed particulars about the sale of agricultural produce and also names and addresses of the seller and such names and addresses could further be perused to reach the location of the land. Once the location was identified there would have been no problem in finding out as to whether the assessee had actually earned any agricultural income by taking such land on lease, as against this, the only evidence available with the Assessing Officer was that certain drafts were issued by the commission agent in favour of the assessee. Therefore, it was a matter of common knowledge that the agricultural produce was sold through the commission agent, if that be so, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing the explanation would arise only in case of making the claim for deduction or exemption, as no such claim was made in this case, the case was not covered by the explanation. The ld. CIT(A) was of the view that in a case where additional income was surrendered in a revised return, penalty was exigible only if the concealment was detected before filing of revised return or before the assessee agreed to such an addition at the time of assessment proceedings. Ld. CIT(A) observed that in assessee s case it was not established at any point of time either before the income was surrendered or thereafter that no agricultural income was earned by the assessee. The ld. CIT(A) observed that in spite of extensive inquiries carried out by the ADI(lnv.), it had still not been established that the assessee had not taken any land on lease or that no agricultural produce was sold through commission agent. He pointed out that the only evidence available was that the assessee had received certain moneys through the commission agent who were dealing with the purchase and the sale of agricultural produce. Ld. CIT(A) opined that once agricultural income was surrendered for tax and the tax paid there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f penalty and the penalty so levied was cancelled. Now the department is in appeal. 7.1. Ld. D.R. for the revenue vehemently argued that the department came to know that black money was being brought in the books in the form of agricultural income and inquiries were conducted by the Investigation Wing of Income-tax department. The detailed report revealed that the assessees had shown bogus agricultural income and thereafter surrendered the agricultural income. The assessee also surrendered the income by means of letter dated 15-5-1996. It was stated that the Assessing Officer in her order in the case of Shri Sunder Mohan Singh had given the names of the persons against whom inquiries were conducted and in the said order name of the assessee appeared on page 3 and the facts of assessee s case are similar to the facts of Shri Sunder Mohan Singh, so, the penalty was rightly levied by the Assessing Officer as was done in the case of Shri Sunder Mohan Singh which had been confirmed by this Bench of the Tribunal vide order dated 6-8-2004 in ITA No. 412/Chandi/2000. It was further stated that the Assessing Officer recorded her satisfaction before initiating penalty proceedings and aske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer and sustained by the ld. CIT(A). Since the facts of the case of the assessee are identical to the facts of the case involved in the case of Shri Rakesh Chawla (supra), therefore, for the sake of consistency also the penalty should be upheld in this case. Reliance was placed on the following case laws: K.P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) Dr. S.B. Bhargava v. CIT [1982] 136 ITR 559 (All.) Vimalchand v. CIT [1985] 155 ITR 593 (Raj.) Mohd. Ibrahim Azimulla v. CIT [1981] 131 ITR 680 (All.) Dayabhai Girdharbhai v. CIT [1957] 32 ITR 677 (Bom.) Sunanda Ram Deka v. CIT [994] 210 ITD 988 (Gauhati) CIT v. J.K.A. Subramania [1997] 110 ITR 602 (Mad.) Amjad Ali Nazir Ali v. CIT [1977] 110 ITR 419 (All.). It was further stated that no revised return could have been filed by the assessee due to the lapse of time otherwise available to the assessee. Reliance was also placed on the following case laws: Rajendra Beesani v. ITO [2003] 85 ITD 144 (Ind.) Kerala State Cashew Development Corpn. Ltd. v. ITO [1990] 186 ITR 521 (Ker.) CIT v. Mohd. Mohtram Farooqui [2003] 259 ITR 1325 (Raj.) CIT v. Dr. Sajjan Singh Malik [1989] 178 ITR 643 (Punj. Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that in similar cases either the penalty proceedings had not been initiated or the penalty was not levied so, the stand of the department should not have been different in the assessee s case. The ld. Counsel for the assessee mentioned the names of various assessees in whose cases either the penalty proceedings were not initiated or the penalty was not levied. The names mentioned were - M/s. Jamna Dass Nikka Mal, S/Shri Mohinder Kumar Jain, Anoop Kumar and Dharam Vir Jain etc. Ld. Counsel for the assessee argued that the expenses relating to agricultural income claimed by the assessee and debiied in the books of account had not been doubted and the notice under section 143(2) was issued by the department on 21-9-1996 whereas the assessee had already offered the income on 21-5-1996, therefore, penalty could not have been levied. Reliance was placed on the following case laws: CIT v. J.K. Synthetics Ltd. [1996] 219 ITR 267 (Delhi) Addl. CIT v. Rawalpindi Flour Mills (P.) Ltd. [1980] 125 ITR 243 (All.) CIT v. M.P. Narayanan [2000] 244 ITR 528 (Mad.) CIT v. P. Govindasamy [2003] 263 ITR 509 (Mad.) ITO v. Preet Palace Pictures [IT Appeal No. 456 (Asr.) of 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Har.) 271 Dy. CIT v. United Vanaspati Ltd. [2005] 275 ITR (AT) 124 (Chd.) CIT v. B.R. Sharma [2005] 275 ITR 303 (Delhi). It was further submitted that the inquiries made by the Assessing Officer from the commission agent did not reveal that the crop was not purchased by them. It was reiterated that the assessee suo motu offered the agricultural income for taxation even before any question was put to him by the ADI. It was farther stayed that the Assessing Officer himself had not made any inquiry but simply reviled on the inquiries made by the ADI. So the penalty was not leviable. Reliance was placed on the judgment of Hon ble Jurisdictional High Court in the case of CIT v. Ved Parkash [2004] 269 ITR 255 (Punj. Har.). Ld. Counsel for the assessee also submitted that the Assessing Officer before initiating penalty proceedings had not recorded any satisfaction and in the absence of independent inquiry and satisfaction of the Assessing Officer, penalty was not leviable under section 271(1)(c) of IT Act. Ld. Counsel for the assessee also distinguished the cases relied on by the ld. D.R. for the revenue, by submitting that in the cases of Shri Rakesh Chawla and others, ADI ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that case a notice was issued by the ADI for verification of agricultural income whereas in assessee s case there was no such notice issued for verification of agricultural income and also in that case the assessee had filed application in Kar Vivad Samadhan Scheme (in short KVSS) to adjust the addition while in assessee s case no such benefit under KVSS had been obtained by the assessee. 9. Ld. D.R. for the revenue in the rejoinder stated that the cases relied on by the ld. counsel for the assessee were not applicable to the facts of the present case. It was stated that the ADI issued summons on 1-5-1996 whereas the assessee surrendered on 15-5-1996, so, it could not be said that the inquiries were not started by the department. It was further stated that the assessee paid the tax on 20-5-1996 which clearly established that the surrender of income and payment of tax followed the summons issued by the ADI and since the ADI was a competent authority, so it could not be said that inquiries were not made or the department was not having the knowledge of concealed income of the assessee before issuing summons. Accordingly it was submitted that it was well-planned scam and the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied by the Assessing Officer and sustained by the ld. CIT(A). In the present case, the main thrust of the arguments of the ld. counsel for the assessee was that when the order was passed by the Tribunal in the case of Rakesh Chawla (supra), the judgment of Hon ble Jurisdictional High Court in the case of Ved Parkash (supra) was not available and the facts of the case of Ved Parkash (supra) are similar to the facts of the assessee s case. So, we have to see as to whether the facts involved in the case of Ved Parkash (supra) are similar to the facts of assessee s case and whether the ratio laid down in that case is applicable to the assessee s case. In the case of Ved Parkash (supra) the facts were that the assessment of the assessee for assessment year 1988-89 was completed under section 143(1) of Income-tax Act and thereafter the ADI found that the assessee had purchased certain bank drafts which were reflected in the books of account on a subsequent date. Meanwhile the assessee voluntarily disclosed, undisclosed income representing the peak investment in the drafts in a revised return much before the Assessing Officer issued any notice to him and assessment was made under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Jurisdictional High Court in the case of Ved Parkash (supra) is squarely applicable to the facts of the present case. In the present case, it is noticed that the sale of agricultural produce was deposited in the bank account and the explanation of the assessee that the agricultural produce was sold through the commission agent, had not been disapproved with any documentary evidence. In other words, it has not been proved that the deposits in the bank account by the assessee claimed to be sale proceeds of agricultural produce, was relating to any other income. In the case of CIT v. Popular Lunghi Co. [1998] 147 CTR 467. Hon ble Madras High Court held as under: It would be clear from the tenor of the inspection report as well as the order of the ITO that the whole matter was a voluntary disclosure on the part of the assessee. But for the letter dated 29-9-1972 to the CIT, the Department had no knowledge about the money lending business. The lAC s satisfaction was based on the fact that it was a search that brought about the disclosure which was clearly proved to be false. In the inspection report, it was clearly pointed out that no materials relating to the money lendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee discharged the burden placed upon. Thus inasmuch as on merits, there was no evidence on the side of the Department to show that the assessee was grossly and wilfully negligent in declaring the correct income, the Tribunal was correct in deleting the penalty levied under section 271(1)(c ). In the present case also, the assessee surrendered the income for the reason that the documents were lost and that the surrender was made before any inquiry either by the ADI or by the Assessing Officer and the surrender so made was much before the issuance of native under section 143(2). In that view of the matter, penalty was not leviable in view of the ratio laid down by Hon ble Madras High Court in the aforesaid referred to case. 10.1 In the instant case, it cannot be said that the assessee had not tendered any explanation because the explanation was given by the assessee that the documents relating to agricultural income were lost during the course of search and for that reason the income earlier claimed as exempt being agricultural income, was surrendered for taxation and the tax was paid, it was also the explanation of the assessee that to avoid vexatious litigation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961 in respect of the same. In the present case also the assessee disclosed the particulars of his income i.e., the agricultural income in Part IV of Income-tax Return so there was no concealment in view of the ratio laid down by the Hon ble Bombay High Court in the aforesaid referred to case. 10.4 It is well-settled that the assessment proceedings and penalty proceedings are two separate and distinct proceedings. The amount can be added in the income of an assessee but the mere addition to the income is not sufficient to hold that the amount so added, was concealed income of the assessee. In the present case also, although the assessee suo motu agreed for addition of that income which was earlier claimed as exempt being an agricultural income but that income was surrendered for taxation since the documents to prove genuineness of agricultural income were claimed to be lost during the course of search and this claim of the assessee had not been rebutted at any stage by the department. 10.5 The Hon ble Jurisdictional High Court in the case of Krishan Lal Siv Chand Rai v. CIT [1973] 88 ITR 293 (Punj. Har.) had held as under : Penalty proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n agent and claimed that receipt was against the proceeds of agricultural produce, however, such facts were not there in the comparable cases. In the comparable case, the penalty had been upheld because it was only after persistent inquiries that the assessee surrendered but in the instant case there was no inquiry initiated before the assessee made the surrender. In view of the above, the facts of the comparable cases relied on by the ld. D.R. for the revenue are distinguishable from the facts of the assessee s case. 10.8 In view of the aforesaid discussion, we do not see any infirmity in the order of ld. CIT(A) in deleting the penalty levied by the Assessing Officer. 10.9 Before parting it is necessary to give the findings on the contention of the ld. counsel for the assessee that no satisfaction was recorded by the Assessing Officer before initiating the penalty proceedings, we do not see any merit in this contention. The Assessing Officer at page 5 of assessment order dated 20-3-1997 had clearly mentioned as under : The assessee cannot suddenly turn around and surrender one source of income altogether. The sanctity of this solemn declaration is violated. The surrende ..... X X X X Extracts X X X X X X X X Extracts X X X X
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