TMI Blog2001 (11) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... unted salary 14,400 (ii) Other receipts indicated in the diary 63,737 78,137 The assessee filed the return of income on 14th Sept., 1987, for the year under appeal declaring income of Rs. 54,060. However, the disclosure made during the course of search vide assessee's letter dt. 25th Aug., 1987, referred to above was not included in the said data. On 27th July, 1989, the assessee filed a revised return declaring income of Rs. 1,17,810. Assessment was completed on an income of Rs. 1,23,050 and the disclosed amount was assessed to tax. Penalty proceedings under s. 271(1)(c) of the IT Act were initiated. The assessee was given an opportunity of being heard during the penalty proceedings as to why penalty may not be imposed for concealment of income. It seems that the assessee had replied claiming that since the assessee had filed the revised return disclosing the additional income, there was no concealment as envisaged under s. 271(1)(c) of the IT Act. It was further claimed that the assessee was entitled to immunity under Expln. 5 to s. 271(1)(c). The AO did not accept this explanation of the assessee and held that the benefit of the proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had made similar disclosure for asst. yrs. 1986-87 and 1988-89, but no penalty for concealment was imposed. Reliance is placed on the decision of the Ahmedabad Bench of the Tribunal in the case of Ashok Natverlal Patel vs. Asstt. CIT (1998) 61 TTJ (Ahd) 139 : (1998) 67 ITD 82 (Ahd) in support of the contention that the AO has not recorded a finding as to whether the assessee is guilty of concealment of income or furnishing of inaccurate particulars of income at the time of initiation of proceedings. The issue raised before us, it was may be stated at the outset, was not raised before the Revenue authorities. Relying upon the decision of the Delhi High Court in the case of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321 : (2000) 246 ITR 568 (Cal), the learned counsel contended that the AO is duty-bound to record a satisfaction during the course of assessment proceedings as to whether there is concealment of income or furnishing of inaccurate particulars of income. Reliance was also placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal (2001) 170 CTR (SC) 182 : (2001) 251 ITR 9 (SC) in support of the contention th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal return, each case has got to be decided on its own facts when a revised return is filed by the assessee without receipt of notice from the Department. In this case, there is no dispute about the fact that the assessee had not filed the return by the time the search took place on 20th Aug., 1987. If the assessee had filed the return thereafter and included the entire income, perhaps no penalty for concealment would have been chargeable without application of Expln. 5 to s. 271(1)(c). In this case the assessee had filed the original return without including the additional income that was admitted to be his income during the course of search by way of letter dt. 25th Aug., 1987. Therefore, when we see the income disclosed by the assessee in his statement under s. 132(4) and reiterated by a revised return subsequently and is compared with the original return filed by the assessee on 14th Sept., 1987, where such income was not disclosed, it is not difficult to conclude that there was omission by the assessee to disclose the additional income in the original return. The issue for consideration still remains as to whether the omission to disclose the additional income in the origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... item of income was admitted by the learned counsel for the assessee to be assessable to tax. With regard to the receipt from the company out of the undisclosed income, the contention on behalf of the assessee is also not well-founded. The company is a distinct person and is assessable to tax. If it has earned income and paid tax on that income, its shareholders, as per the law applicable for the assessment year under appeal, were also liable to tax in respect of the income distributed amongst them. Therefore, the distribution of concealed income amongst the shareholders/ directors is nothing but income liable to tax. Their Lordships of the Hon'ble Supreme Court in the case of CIT vs. G.R. Karthikeyan (1993) 112 CTR (SC) 302 : (1993) 201 ITR 866 (SC) and in the case of Universal Radiators vs. CIT (1993) 112 CTR (SC) 61 : (1993) 201 ITR 800 (SC) have explained the concept of income and accordingly, the income which was offered for taxation out of the income of the company was liable to tax in the hands of the directors to the extent of the amount so received. 11. The decisions cited on behalf of the assessee in support of the contention that penalty for concealment cannot be levie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(c) of the IT Act in that case was not warranted. A careful reading of the aforementioned decisions leads to the following conclusions: (i) That it is mandatory for the AO to record satisfaction in regard to concealment of income or/and furnishing inaccurate particulars of income during the course of assessment proceedings. (ii) That the material on record should justify the inference that the AO had recorded the satisfaction required under s. 275 in the assessment proceedings. (iii) That mere direction by the AO for issue of notice under s. 271(1)(c) of the IT Act without there being any other material to show that satisfaction was arrived at is not sufficient to satisfy the requirement of s. 275. 13. In this case the issue having been raised for the first time and the Revenue not having any opportunity to produce material on the basis of which one could arrive at a conclusion one way or the other I consider it just and reasonable to remit this matter to the file of the CIT(A) for deciding the issue as to whether the AO had recorded the satisfaction in regard to concealment and/or furnishing of inaccurate particulars of income in the course of assessment proceedings. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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