TMI Blog1991 (3) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 11 lacs for the assessment year 1983-84 and Rs. 10 lacs for assessment year 1982-83. As the assessments involved were completed, the assessee's appeal under section 132(11) was rejected by the CIT as infructuous. 3. In the meantime, on 10-1-1983, the assessee made an application to the CIT for agreed assessment for the assessment years 1979-80 to 1982-83, offering additional income of Rs. 17.5 lakhs over and above the returned incomes for those years Rs. 10.5 lakhs for assessment year 1979-80 ; Rs. 2 lakhs each for assessment years 1980-81 and 1981-82 ; and Rs. 3 lakhs for assessment years 1982-83. It was before the department scrutinised the seized material and to buy peace, inter alia, with the following request : " (v) No action for penalty under sections 271(1)(a), 271(1)(b), 271(1)(c) and 273 or under any other sections of the Income-tax Act and section 18 of the Wealth-tax Act, shall be initiated against me for assessment years 1978-79 to 1982-83 and if already initiated the same shall be vacated. (vii) I shall be allowed to capitalise a sum of Rs. 15,00,000 as cash in hand as on 31-3-1982 over and above cash in hand disclosed in the books of account of Film-walas o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,59,039, Rs. 3,43,680 and Rs. 2,04,820 respectively by holding that the assessee's agreement for the addition of Rs. 19 lakhs in the assessment years 1979-80 to 1982-83 was attributable to-- (i) Unproved hundi borrowings raised for production of film and disallowable of interest thereon ; (ii) Unproved donations introduced in the books of account of Prithvi Raj Kapoor Memorial Trust of which the assessee is a Settlor ; (iii) Unaccounted professional receipts for the film 'Suhag' ; and (iv) Inflation of expenses in production of film 'Kalyug' and '36 Chowranghee Lane'. According to the ITO, the provisions of Explanation (1) to section 271(1)(c) of the Act were clearly applicable in the case. The assessee, he states, has credited in his books of account loans in the names of parties who are really not men of means, debited interest thereon and also has credited in the books of account of Prithvi Raj Kapoor Memorial Trust of which he is a Settlor, sums in the guise of donations from the parties, who in fact have no means to pay. Coupled with the offer for taxation and the request for capitalisation of the amounts in the books of account, according to him, clearly led to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was concerned. As regards the issue of department not making any enquiries regarding genuineness of loans etc., he felt that this cannot hide the aspect of furnishing inaccurate particulars. In an agreed assessment, the assessee is saved harassment while the department is saved the time and energy of having to carry out detailed enquiries. He found that the ITO has already taken due note of this factor and imposed only the minimum penalty. He also gave emphasis to the fact that the assessee did not contest the additions that were made when appeals against the quantum assessment were made having admitted an income higher than what was returned, and after opting to capitalise such income, he opined that the appellant cannot say that there has been no concealment or no furnishing of inaccurate particulars thereof. In the result, the CIT(A) upheld the orders of penalty. 6. The learned counsel for the assessee raised the following contentions : (i) that surrender of income does not invite penalty. For this proposition, he relied upon the decisions in the case of CIT v. P.M.P. Soundara Pandian Bros. [1983] 140 ITR 385 (Mad.), CIT v. Reliable Trading Agency [1982] 138 ITR 505 (Cal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions made in the assessments. The offer of Rs. 19 lakhs income was to cover the bogus hundi loans and other disallowable expenditure. As the assessments were not challenged by the assessee, it could be deemed to be an admission of the income and concealment, in view of the decision of the Calcutta High Court in the case of CIT v. P.B. Shah Co. (P) Ltd. [1978] 113 ITR 587. He also submitted that the petition under section 273A of the Act was rejected on 4-3-1986 and, therefore, it could be assumed that the disclosure was not voluntary. He also relied upon the judgment of the Bombay High Court in Western Automobiles (India) v. CIT [1978] 112 ITR 1048 ; that of the Supreme Court in G.C. Agarwal v. CIT [1990] 186 ITR 571 (SC) ; that of the Madhya Pradesh High Court in Nav Nirman Co. v. CIT [1984] 148 ITR 703 ; that of Allahabad High Court in Banaras Chemical Factory v. CIT [1977] 108 ITR 96 besides the Full Bench decision of the Gauhati High Court in K.C. Trunk Bucket Factory v. CIT [1975] 99 ITR 67, wherein it has been held that it is for the assessee to prove that there was no concealment. According to him, Explanation 1 was clearly applicable in this case as what the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the total income assessed and unless the assessee proves that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part, the assessee is deemed to have furnished inaccurate particulars of his income. But this Explanation was also held to be a rebuttable presumption and if the assessee offered a reasonable explanation acceptable to the revenue authorities or the Tribunal, he could not be charged with penalty. Therefore, insofar as the main provisions for charging penalty under section 271(1)(c) without the aid of the Explanation are concerned, an assessee could not be charged with penalty unless the circumstances lead to a reasonable and a positive inference that the assessee's explanation was false. The onus to prove the concealment under the main provisions till remains upon the revenue. This is barring those cases where the Explanation applies that is where the income returned is less than 80 per cent of the total income assessed, in which case the onus was shifted to the assessee. In other words, the penalty for the 'deliberate act' of the assessee was shifted to the 'gross or wilful neglect' of the assessee. 9. In 1976, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an element of deliberateness. The fact must not remain only 'unproved' but 'disproved' by the income-tax authorities for levying penalty. The last limb of deemed concealment in the Explanation is that where the assessee offers an explanation but he is not able to substantiate the same. This part of deeming is with two riders - (i) explanation was bona fide and (ii) all the facts material to the computation have been furnished by the assessee. 10. The words " added or disallowed in computing the total income " denotes an action of the income-tax authorities. If in a case the amount has not been added or disallowed in computing the total income of the assessee as a result of some action of the income-tax authorities but on other grounds, namely, because of the assessee's offering the addition or disallowance, the deeming provision, in our opinion would not be applicable. At the same time, the offer of the assessee should not, however, be after or consequent to the detection of concealment or furnishing of inaccurate particulars by the assessee as, in such circumstances, one could not say that the amount was not added or disallowed by the ITO in computing the total income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-2-1983. This amount, therefore, could not be said to have been added or disallowed by the ITO and, accordingly, no penalty with respect thereto can be levied. 12. There has been some allegation of inflation of expenses in connection with the production of the film 'Junoon' but since no separate addition has been made on this account and in any case mere rejection of assessee's claim would not be sufficient to levy penalty with respect to such disallowance. We, therefore, delete the penalty levied in the assessment year 1979-80. 13. As regards assessment year 1980-81, the first item for which penalty is levied, is the interest on hundi loans amounting to Rs. 2,12,000. For the reasons stated while discussing the appeal for the assessment year 1979-80, we hold that no penalty could be levied with respect to this item. The second item for which penalty has been levied for this year is the sum of Rs. 3 lakhs being the fees received by the assessee for acting in the film 'Suhag'. The assessee had actually received a sum of Rs. 50,000 which was disclosed in his books of account and consequently offered to tax in the return. The assessee is following cash system of accounting. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the circumstances, we delete the penalty levied for this year as well. 15. A strong reliance has been placed by the revenue on the capitalisation of a sum of Rs. 15 lakhs by the assessee as on 1-4-1983. As the offer made by the assessee as such was not acted upon or proceeded with, no cognisance of the capitalisation thereunder could be taken note of by the revenue for concluding concealment. The entry of Rs. 15 lakhs made on 1-4-1983 has to be treated only as a paper entry and to be ignored for all purposes and intent. The seizure of cash of Rs. 1,48,524 was on 22-10-1982 which fell in assessment year 1983-84. The Calcutta High Court in the case of Bhagwanji Bhawanbhai Co. held that even though the assessee offered the amount to be assessed after spreading over the amount for a period of years, there was no statement in the disclosure/offer to the effect that the amount in question represented its income or receipt of a revenue character of the year in question. The Court in that case held that the credit of an amount of Rs. 2,45,000 under " Disclosure Capital Account " in place of various loan amounts in its books of account at a later year did not amount to an admission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f material leading to that conclusion. In the circumstances, the Court held that there must be evidence, either in the admission of the assessee in the disclosure petition or aliunde adduced by the revenue to show that the amount represented receipt of revenue character in the relevant assessment year and it would not be sufficient to rely on the finding that a certain amount had been added as the income of the assessee of which the assessee could not explain the source nor would it be sufficient for penalty proceeding to rely on the statement of the assessee that the assessee had offered the amount for assessment in a particular year. The Court then held that the facts and circumstances and the terms and conditions under which the assessee had offered the amount for taxation must be looked into. In the cases on hand, in the petition of offer, the assessee had repeatedly 'stated' that the loans were genuine and the confirmation letters along with the P.A. Numbers/GIR Numbers were filed. The offer was made by the assessee only to buy peace and to avoid protracted litigation with the department. 16. Of course, the case before Their Lordships of the Calcutta High Court was dealing w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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