TMI Blog2011 (12) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... facts leading to the levy of penalty by the AO are as under : A search under s. 132 of the IT Act was initiated on 2nd Dec., 2004 in the case of the assessee along with M/s Marathon Realty Ltd. and other group cases. During the course of the said search various documents, books of accounts etc. were found and seized. During the course of search action at the residence of Shri Virendra Shetty, senior executive of the assessee group companies residing at C-401, Saidham Complex, PK Road Extension, Mulund (W), Mumbai-80, a file marked as 'Annex. A1' containing pp. 1 to 10 as per Panchnama dt. 2nd Dec., 2004 was found and seized. Page Nos. 6 (both sides) and 7 of this file pertain to the assessee. In the statement recorded at the time of search proceedings from Shri Virendra Shetty and Shri Mayyur Shah, directors of the assessee company they admitted the fact that the contents of the pp. 6 and 7 pertain to the assessee group companies. The page No. 6 revealed that the cash reflected in the seized paper was received by Shri Virendra Shetty on various dates between 4th Sept., 2004 to 1st Dec., 2004 on behalf of the assessee and was ultimately handed over periodically to the dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in computation of total income of the assessee company as deduction from the gross amount of cash of ₹ 4.49 crores as appearing in the seized paper. The AO noted that the assessee could not submit any details being nature of such expenses, persons to whom payments made, bills, vouchers or any of the relevant documents. Regarding middlemen payments the assessee could not give any details as to names of persons who acted as middlemen. According to him even otherwise also those payments are to be considered as illegal payments, since the assessee could not substantiate the claim of such expenditure or payments to middlemen. The AO asked the assessee to show-cause as to why the total of transaction recorded in the seized papers being ₹ 4,49,48,800 should not be treated as undisclosed income of the assessee on account of on-money receipts. 4.2 The assessee in its reply filed its submissions which read as under : There was search and seizure action under s. 132 of IT Act 1961 at the premises of Marathon Group as on 2nd Dec., 2004 and 3rd Dec., 2004. At that time we had declared an undisclosed Income of ₹ 1,23,85,000 (in asst. yr. 2005-2006). The total offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,85,000, the total additional income is ₹ 4,02.53,800 for MRNTL. On addition of undisclosed income for Marathon Realty Ltd. of ₹ 46,95,000 the total undisclosed income for Marathon Group comes to ₹ 4,49,48,800. We had not charged on-money in the various projects since the projects though commenced in February, 2004 the booking of the flats was started in September, 2004. Since these were relatively new projects there is no question of charging on-money previously. Whatever amounts collected by us were to meet expenses of middlemen for freeing the property from encroachments and other expenses to meet for the same purpose. This is not the normal business practice of us. All the above amounts stated though the same are genuine expenses for us, we are not in the position to justify the same with IT Department. We want to buy peace of mind and to avoid protracted litigation we have no objection if the IT Department makes addition to its undisclosed income at the tune of ₹ 2,78,68,800 as discussed above. We request that the IT Department should not levy penalty proceedings under s. 271(1)(c) of IT Act, 1961 taking into consideration the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has thus disclosed the amount in the return of income filed, disclosed in the statement recorded under s. 132(4) and the manner of earning the said income has also been disclosed and the tax on the same has also been paid. Therefore, the assessee falls within the scope of immunity provided under Expln. 5 to s. 271(1)(c) of the Act. 5.3 So far as the balance amount of ₹ 2,78,68,800 is concerned, it was submitted that during the course of assessment proceedings it was explained before the AO that ₹ 110.50 lacs was not received at all, as there was no initials of any family member receiving such amount in the loose papers seized, on the basis of which the addition is made. So far as the balance amount of ₹ 1,68,18,800 is concerned it was categorically stated during the course of search proceedings itself that this was incurred as expenses for removing encroachments etc. It was submitted that merely because the explanation given could not be substantiated, that by itself would not lead to concealment of income or furnishing of inaccurate particulars of income and hence, the penalty proceedings initiated may be dropped. 5.4 Various decisions were also cited b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional income during the assessment proceedings just to buy peace and to avoid prolonged litigation and with a specific prayer/condition that no penalty should be levied in respect of this addition. Thus in the assessment order the addition was made by way of agreed assessment, for which the assessee did not prefer any appeal against the addition. The addition was made on the basis of assessee's offer of the amount and there is no other independent material/evidence on record to establish that the amount of addition represented the assessee's income so as to conclude that the assessee has concealed the particulars of its income. It was submitted that in this case since the AO had made the addition on the basis of offer/surrender by the assessee, and has thus accepted the offer, therefore, the offer has to be accepted along with the condition and not without that. The Department cannot blow hot and cold at the same time. It cannot accept the offer to make the addition and reject the attaching condition to impose the penalty. It was submitted that the Department in the instant case has not made any independent enquiry. Therefore, if the assessee's conditional off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initials of any persons on the last column of the document. The AO has not controverted the above submissions of the responsible persons. According to him the assessee had offered an explanation with reference to the non-receipt of the said two amounts and has been able to substantiate the same with the help of statement of Shri Virendra Shetty as well as the absence of initials against the said entries in the seized documents. The above explanation has not been proved to be false or untrue. Therefore, the penalty under s. 271(1)(c) of the IT Act. cannot be levied on the amount of ₹ 110.50 lakhs. 6.2 So far as the other two amounts i.e., 1.38 crore and 25 lakhs are concerned, he noted that the same has been claimed to be expenditure on account of payments made to middlemen to settle property encroachments and business expenditure respectively. However, no evidence was filed to substantiate the said statement, no documents indicating any such expenses having been incurred were found and seized during the course of search action. Therefore, the expenditure cannot be accepted as genuine merely on the basis of statement without filing any document or evidence to corroborate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the assessee drew the attention of the Bench to Q. No. 8 put to Shri Virendra Shetty and the reply given by him, according to which the amounts mentioned against date 16th Oct., 2004 and 20th Oct., 2004 were to be received. But anyhow the money was not received and, therefore, there is no signature. Persons who use to receive the cash have made statements before the search party itself that the amounts of ₹ 100.50 lakhs and ₹ 10 lacs were never received. Referring to the statement of Shri Mayur Shah, director of the assessee company recorded by the search party on 22nd Jan., 2005 under s.132(4) of the Act, the learned counsel for the assessee drew the attention of the Bench to Q. No. 7 put by the Dy. Director of IT and the reply given by him according to which an amount of ₹ 3.38 crores only is received which is duly acknowledged. He submitted that in response to Q. No. 8, the director had stated that out of ₹ 3.38 crores received, ₹ 1.75 crore was found and the balance amount was spent. Further, the director had also given the break-up of expenditure according to which an amount of ₹ 25 lacs was incurred for business needs and an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-s. (1) of s. 139 and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income. He submitted that the assessee in the instant case has met all the conditions of the Expln. 5 to s. 271(1)(c) of the IT Act. Referring to the provisions of Expln. 1 to s. 271(1)(c) of the IT Act, he submitted that the assessee in the instant case has offered an explanation to the AO who has not brought out anything on record to show that such explanation is false. The assessee has also substantiated the disparity made by it giving the gross and net amount. He submitted that the bona fide of the assessee shows that the statement given at the time of search was not an afterthought. 8.2 Referring to the decision of Pune Bench of the Tribunal in the case of Kanbay Software India (P) Ltd. vs. Dy. CIT (2009) 22 DTR (Pn)(Trib) 481he drew the attention of the Bench to paras 60 to 68 of the order and submitted that when an explanation is offered by the assessee in discharge of the onus cast upon him by Expln. 1 to s. 271(1)(c) of the IT Act, it is not for the AO to ponder over what should have happened in idea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt contains coded language which could not be deciphered without the help of the assessee, he submitted that there is no code as such since it is crystal clear from the language itself. So far as the submission of the learned counsel for the assessee that it was a conditional offer, he submitted that conditional offer has no legal sanctity as far as income-tax proceedings are concerned. Referring to the decision of Hon'ble Supreme Court in the case of V.C. Shukla (supra) relied on by the learned counsel for the assessee, he submitted that the ratio of the said decision is not applicable to the facts of the present case. He submitted that when the assessee during the course of search proceedings and assessment proceedings has admitted the receipt of on-money, no further enquiry was required by the Department. 9.1 The learned Departmental Representative also relied on the decision in the case of Dy. CIT vs. Chirag Metal Rolling Mills Ltd. (2007) 207 CTR (MP) 395: (2008) 305 ITR 29(MP) and the decisions in H.V. Venugopal Chettiar vs. CIT (1985) 153 ITR 376(Mad), CIT vs. D.K.B. Co. (2000) 161 CTR (Ker) 187: (2000) 243 ITR 618(Ker) and Rathnam Co. vs. IAC (1980) 14 CTR (Mad) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings, the assessee offered the amount of ₹ 2,78,68,800 as additional income with a condition that no penalty should be levied. It was also explained that the same is being offered as the assessee is not in a position to substantiate with evidence and to buy peace and to avoid prolonged litigation. We find the AO was not convinced with the explanation given by the assessee and levied penalty on the amount of ₹ 1,10,50,000 and ₹ 1,63,00,000 respectively which is the dispute in the impugned cross-appeals. 11.1 We find the learned CIT(A) deleted the penalty levied by the AO on the amount of ₹ 110.50 lacs on the ground that there is no signature on the seized document as a token of receipt of on-money against the entries of ₹ 100.5 lakhs and ₹ 10 lakhs respectively. Further Shri Virendra Shetty in his statement recorded under s. 132(4) had stated non-receipt of the said amount and the director Shri Mayyur Shah had also stated during the assessment proceedings about non-receipt of the said amount. However, he sustained the penalty of ₹ 1.63 crore on the ground that no documentary evidence was filed to substantiate that such expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts of ₹ 10 lacs and 100.50 lacs respectively were not received and the same did not bear initials of any person on the last column of the document. When the marketing executive Shri Virendra Shetty and the director of the company Shri Mayyur Shah have categorically stated that the amounts of ₹ 10 lacs and 100.50 lacs were not received and when the seized document does not contain the signatures or initials of any family member or director of the assessee company acknowledging the receipt of the same, therefore, merely because the assessee has offered the same as additional income during the course of assessment proceedings, the same in our opinion does not call for levy of penalty under s. 271(1)(c) of the Act. In this view of the matter and in view of the detailed discussion by the learned CIT(A) on this issue and in absence of any contrary material brought to our notice against the findings of the learned CIT(A) on this issue we do not find any infirmity in his order deleting the penalty levied on ₹ 1,10,50,000. We accordingly uphold the same and the ground raised by the Revenue is dismissed. 12. Now coming to the ground raised by the assessee, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the offer letter of the assessee does not call for levy of penalty under s. 271(1)(c) of the Act. 12.1 We find the Hon'ble Supreme Court in the case of Reliance Petroproducts (P) Ltd. (supra) has held as under : (Short notes): A glance at the provisions of s. 271(1)(c) of the IT Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word 'particulars' used in s. 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditionally gave up the claim under the first proviso to s. 9 of the Act and only argued for the waiver or reduction of the penalty. The Tribunal in further revision held that the assessee agreed to get its claim for deduction under first proviso to s. 9 of the Act rejected unconditionally but did not agree to the post-assessment penalty. On reference : Held, that on a plain reading of the letter of assesses's counsel to the Dy. and in the light of the facts, it was clear that the offer made in the letter to give up the claim of deduction under first proviso to s. 9 of the Act was clearly a conditional offer on the post-assessment penalty levied and leviable being given up. If it was rejected by the Dy. CIT he was bound to deal with the claim of the assessees for deduction under the first proviso to s. 9 of the Act on merits. That an offer if coupled with conditions which are not reasonable or one which cannot be accepted in laid completely would not render unconditional the offer which is in terms made on a condition. If it is not possible to accept that condition, the only result would be that offer must be rejected. But where an offer is coupled with conditions wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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