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2005 (2) TMI 858 - Karnataka High Court

2005 (2) TMI 858 - Karnataka High Court - TMI - ITRC No. 246 of 1998 - Dated:- 14-2-2005 - Mr. H. L. Dattu, And H. N. Nagmohan Das, JJ. For the Applicant : Sri. M. V. Seshachala, Adv. For the Respondent : Sri. S. Parthasarathi, Adv. JUDGMENT : - On an application filed by the revenue under Sec. 256(1) of the Income Tax Act, 1961 (hereinafter for the sake of brevity referred to as the Act ), the Tribunal has stated the case and has referred the question of the law arising out of the order passed .....

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e Intelligence Wing of the Department had conducted proceedings under Sec.132 of the Act in the business premises of the assessee s sister concern, During search and seizure, the books of accounts maintained by the assessee had also been seized. While scrutinizing the seized documents, it was noticed that there was certain cash credits which were reflected in the books of accounts maintained by the assessee during its regular course of business. 3. After the conduct of search seizure by the Depa .....

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under Sec.271(1)(c) of the Act by issuing a show cause notice to the assessee directing it to show cause why penalty under Sec.271(1)(c) of the Act should not be levied in view of the concealment of income while declaring the return of income for the year on 31.3.1985. The assessee had offered its explanation. In that, the assessee had stated that it is not in a position to get any certificate from its creditors to prove its bonafides. 5. The assessing authority treading the entire additions mad .....

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ion. 7. The revenue being aggrieved by the orders passed by the first appellate authority, had carried the matter in an appeal before the Income Tax Appellate Tribunal in ITA No.232/1991. The Tribunal after hearing the learned Counsels for the parties to the lis and being of the view that the acceptance of the assessee for the additions to be made in the return of income is only to buy peace and also to give quietus to the possible litigation, had proceeded to hold that the some cannot be constr .....

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of as required by the AO. At the same time, it is also true that to enable the assessee to buy peace with the department he agreed for the addition of the cash credits. Since the addition is as agreed by the assessee, we hold that in the light the decision of the Supreme Court reported in 168 ITR 705, no penalty under Sec.271(1)(c) of the Act will lie. We, therefore, uphold the order of the CIT (A) cancelling the penalty . 9. The revenue being aggrieved by the order passed by the Tribunal had fi .....

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t have proceeded on the basic that the assessee in order to buy peace had accepted an addition of a sum of ₹ 7,21,250/- to the return of income filed for the assessment year 1985-1986. Since there was not proper explanation the assessing authority was justified in holdings that a sum of ₹ 7,21,250/- is a concealed income and therefore, the penalty provisions are attracted. In aid of his submissions, the leaned Counsel has relied upon the observations made by a Division Bench of this .....

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ncome in the return filed by the assessee was a glaring fact, It was not passible to inter any agreement by the Revenue either in clear terms or by necessary implication, to act on the basic of the assessee s latter. The Tribunal was not right in cancelling the penalty. 12. In Re. Union of India and another Vs. Banwari Lal Agarwal - 238 ITR 461, the Supreme Court has observed as under: Further more, there is nothing on the record which could lead the High Court to the conclusion that any underst .....

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greed for addition of income to his return of income only to buy peace before the authorities and therefore, the addition so made cannot be construed by no stretch of imagination that is a concealed income and it would attract penalty provisions as provided under Sec.271(1)(c) of the Act. In aid of his submissions the learned Counsel has relied upon the observations made by the Madhya Pradesh High Court in the case of Commissioner of Income Tax Vs. Suresh Chandra Mittal - 241 ITR 124, which deci .....

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nalty provision under Sec.271(1)(c) of the Act, The Madhya Pradesh for arriving at the aforesaid conclusion. Has squarely relied upon the observation made by the Apex Court in Sir Shadilal Sugar and General Mills Ltd. Vs. Commissioner of Income Tax - [1987] 168 ITR 705. 15. Sri Seshachala, learned counsel appearing for the revenue would contend that in the case of K.P. Madhusudanan Vs. Commissioner of Income Tax - 251 ITR 99, the Supreme Court has clearly distinguished and has infact observed th .....

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his Court in Sir Shadilal Sugar and General Mills Ltd. Vs. CIT - [1987] 168 ITR 705. He submitted that the assessee had agreed to the additions to his income referred to here-in-above to buy peace and it did not follow therefrom that the amount that was agreed to be added was concealed income. That it did not follow that the amount agreed to be added was concealed income is undoubtedly what was laid down by this Court in the case of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 an .....

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sing authority dated 30.3.1989 levying penalty under Sec. 271(1)(c) of the Act. It is an admitted fact that after the search and seizure in the sister concern of the assessee in the present case, the books of accounts maintained by the assessee had also been sized and there was certain credit entries made and the assessee was not in the position to offer proper explanation for those credit entries and infect after it filed returns of income before the assessing authority, it had admitted for add .....

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