TMI Blog1998 (8) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has surrendered peak credit of agricultural cash credits only to avoid any further litigation and harassment and such surrender was made subject to no penalty proceedings of concealment. The appellant relied on the decision of CIT v. Bhimji Bhanjee Co. [1984] 146 ITR 145 (Bom). The appellant took plea before the Assessing Officer in the penalty proceedings to allow him to produce the creditors. The Assessing Officer rejected the plea that there is no use to produce the creditors at the penalty stage. The Assessing Officer has made following observations which will require further discussion : "The assessee having agreed to have the matter disposed of in a particular way cannot change the course of events by rising further disputes. It is no where written in the letter dated 15-1-1991 that in case its offer is not acceptable by the department in toto the creditors will be produced." The matter was agitated upon before the Id. CIT(A) and the Id. CIT(A) has given following observations :- "4. I have given careful consideration to the arguments of the Id. counsel and my findings are as under :- (i) The Assessing Officer has imposed the penalty mainly on the ground that add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Banta Singh Kartar Singh v. CIT [1980] 125 ITR 239. As such penalty is not exigible in this case since addition was made on agreed basis subject to no penalty of concealment. Moreover, the Assessing Officer was not justified in refusing to record the evidence of creditors at penalty stage and as such penalty has been imposed without giving proper opportunity to the assessee. (ii) Reliance placed by the Id. counsel in the case of CIT v. Bhimji Bhanjee Co. [1984] 146 ITR 145 (Bom.) appears to be correct. The assessee had surrendered the credits in order to avoid further litigation and harassment and thus it was never admitted that assessee had concealed its income. In similar circumstances in the case of Bombay High Court referred to above, it was held by the Hon'ble High Court that penalty under section 271(l)(c) was not exigible." 3. The Id. DR has heavily relied on the order passed by the Assessing Officer. The Id. DR pleaded that the cash creditors should have been examined at the level of CIT(A). He has pleaded that the matter may be referred back to the Id. CIT(A) with the direction to allow the opportunity to produce the case creditors. 4. The Id. counsel of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created by the Assessing Officer relates to refusal of production of cash creditors in penalty proceedings. In the penalty order the Assessing Officer is categorically saying that after having agreed to surrender the income in a particular way he cannot open the chapter of genuineness of the credit. These observations of the Assessing Officer are not legally maintainable on two counts. The first count relates to right of appellant to take afresh look and stand in the penalty proceedings. Secondly, the appellant has surrendered subject to the fact that the Assessing Officer will not initiate penalty proceedings. The Assessing Officer cannot eat the cake from both sides. The question of allowing the CIT(A) to examine afresh the cash credit will also not be correct appreciation of fact because the satisfaction of imposing and not imposing the penalty in the IT Act is relatable to the Assessing Officer. The judicial authorities have to analysis the material available before them and give their opinion whether the material available before the Assessing Officer was sufficient enough to arrive at a conclusion that there was satisfactory explanation regarding concealment of income or fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the ITO as the assessee's concealed income from business and not as income from undisclosed sources. In the present case, the assessee has nowhere admitted that it has concealed its income and even the ITO has not added the said amount of Rs. 10,590 as concealed income from business but as from undisclosed sources. In view of this, the said decision in the case of Western Automobiles (India) v. CIT [1978] 112 ITR 1048 (Bom.) is clearly applicable to the present case." 10. In the case of the appellant even in the surrender letter he has clearly mentioned that the surrender is subject to no concealment. This clearly shows that the assessee is not admitting that the income is concealed. It was, therefore, duty of the Assessing Officer to establish concealment during the penalty proceedings, at least should have allowed the appellant to produce the cash creditors which was denied to him depending upon the same surrender agreement in which appellant has categorically pleaded that the surrender is subject to no concealment. This type of situation has been dealt by the Hon'ble Supreme Court in the case of Sir Shadilal Sugar General Mills Ltd. v. CIT [1987] 168 ITR 705 / 33 Taxman 46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in case of the surrendered addition, if surrender is made specifically on the condition that no penalty will be levied or if the surrender is made with a view to buy peace or avoid harassment or litigation. The Hon'ble Bombay High Court in the case of CIT v. Kiran Co. [1996] 217 ITR 326 / [1994] 74 Taxman 168 have dealt with the issue. In that case, the appellant made a conditional offer and offered an amount for taxation and in the letter specifically stated that no penalty should be levied on the assessee as, according to the assessee, no penalty was leviable. The Hon'ble High Court relied on their earlier decision in CIT v. Haji Gaffar Haji Dada Chini [1988] 169 ITR 33 (Bom.) and quashed the penalty order. In case of Haji Gaffar Haji Dada Chini (supra), the assessee who offered the credits for assessment also stated that the penalty be imposed on merit. But Hon'ble Bombay High Court did not confirm the imposition of penalty. 12. The Hon'ble Madras High Court has also decided the issue in CIT v. Adamkhan. In this case the appellant also agreed for addition to income on the condition that the penalty will not be imposed. The appellant surrendered interest on the peak loan ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee an opportunity to show that the surrendered amounts were in reality not for certain reasons that he had made surrender of the amount. Apparently, it is this notion that has prevailed with the Inspecting Assistant Commissioner in deciding the instant penalty cases as is manifestly evident from the order the relevant portion of which has been reproduced above. It is to be borne in mind that the penalty proceedings are distinct from the assessment proceedings and are in the nature of quasi-criminal proceedings. The onus was on the department to positively prove and produce for that purpose, certain other material besides the factum of surrender that the amounts in dispute were the undisclosed income of the assessee. We agree with Mr. Sharma, learned counsel for the assessee, that the mere fact of surrender could not necessarily be an admission of the assessee that the amounts surrendered were its undisclosed income. The surrender by the assessee could have been for more than one reason in spite of the fact that it was his income and that fact alone could not be the basis of imposing penalty as has been done in the present case. This view of ours finds full support from B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble High Court has observed that the assessment was not made on any concession or offer by the assessee. The assessee has not offered the condition subject to no penalty.The offer of assessment has come after long drawn investigation. Therefore, facts and circumstances of the case of K. P. Sampath Reddy (supra) are not applicable on the facts and circumstances of the case of the appellant. All other High Courts are in tone with the observations discussed above. The Hon'ble Calcutta High Court in case of CIT v. Nuruddin Bros. [1990] 185 ITR 481, has observed that if the appellant agrees to certain addition and disallowance that itself will not give power to the Assessing Officer to impose penalty and presume that the appellant has concealed the income or filed inaccurate particulars of income. Similar view is held by the Madhya Pradesh High Court in the case of CIT v. Punjab Tyres [1986] 162 ITR 517 and Kerala High Court in the case of CIT v. Shri Pawan Kumar Dalmia [1987] 168 ITR 1. 16. Keeping in view the above observation, penalty imposed is cancelled. 17. C.O.46(ASR)/1992 The cross objection filed by the assessee being infructuous is also dismissed. 18. In the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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