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TMI Blog1989 (8) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... in the seized books and the regular books of accounts was able to establish that, the duplicate set of account books belonged to the assessee. He identified specific transactions that were unaccounted at the time of the original assessment. He accordingly issued the notices under section 148 on26-3-82,17-2-83,23-9-83for the four assessment years under consideration. He after considering the explanations provided by the assessee completed the assessments u/s 143(3) read with section 148 on31-1-84for all the four assessment years. The additions fell broadly into five categories, viz., (1) sale shown as cash sale in regular books but shown as credit sale in the duplicate set of accounts with a view to introduce cash into the regular books; (2) difference in cash receipts as noted in regular books and as in duplicate books: Sales and expenses as noted in duplicate set of accounts; (3) payments made to parties for buying of timber whose names appear in abbreviation such as JPS, BDS & LNS, the profit element only considered; (4) difference in the closing cash balance between the duplicate set of accounts and the regular books; and (5) payments made appearing in duplicate books but not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for unrecorded purchases may be adopted. If such investments exceed the accumulated funds of profits on suppressed sales of earlier years, the same may be added to the income for the respective years, otherwise it may be held that such an investment is made out of funds available with us. 3. No addition for petty cash payments and receipts be made as it is fully covered by the accumulated funds available with us out of profits offered for taxation. 4. The above offer is subject to the condition that the department will not initiate penalty and prosecution proceedings against the firm and partners. 5. As a package compromise, we will withdraw our appeals for asst. years 1973-74 to 1976-77. The CIT on7-12-84(the same day as the petition is dated for settlement) passed his order accepting the settlement which reads--- " Income assessed earlier for the asst. years 1973-73 to 1976-77 at Rs. 163431 would form the availability of funds/capital which was circulated by the firm in uchanti business during the assessment years 1977-78 onwards i.e., upto the asst. year 1982-83. The availability of these funds is estimated on the condition that the assessee shall withdraw the appeals filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled income though voluntarily would not be a bar for imposition of penalty. He also placed reliance on the ratio laid down by the Allahabad High Court in CIT v. Sir Shadi Lal Sugar & General Mills Ltd. [1972] 86 ITR 776, for the proposition that consequent to search proceedings under sec. 132, if duplicate records are detected and on such recovery if the assessee had admitted its omission and consented to the inclusion of such omitted income, the assessee was liable for penalty u/s 271(1)(c). He further observed that the case of the assessee was similar in nature to the one considered by the Allahabad High Court in Banaras Chemical Factory v. CIT [1977] 108 ITR 96. He observed that in that case consequent to the search large scale omissions to record the business transactions were discovered and when confronted with the situation the assessee had made a voluntary disclosure of the concealed income. He observed that the ratio laid down was that merely for the reason that the assessee had made a voluntary disclosure of its income would not absolve it from the penalty. He also placed reliance on the ratio laid down by the Punjab & Haryana High Court in Shiv Narain Khanna v. CIT [1977 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the concealment of income is to be proved by positive evidence and cogent material. Considering all these facts and circumstances of the case, the penalty orders passed in all the four years by the ITO are not justified and the same are cancelled. " 3. The revenue's objection is that the CIT(A) had traversed into an area which was not falling within his perview and had held that the CIT had intended to cancel the penalty. If the CIT had to cancel the penalty, then he would have so ordered instead of observing that assessee's application of waiver or reduction would be considered on merits as and when made. The plea was that this could not be the basis at all for the CIT(A) to quash the penalties which were levied for concealment. The learned departmental representative Sh. Agarwal submitted that the search revealed the maintenance of duplicate sets of account books and several incriminating documents were seized. The only plea that was made before the ITO was that since it had moved the application of settlement of its income on the condition that no penalty would be levied on it and that it was so agreed to by the CIT and therefore no penalty should be imposed. The ITO in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leaded that the CIT(A) did not even bother to examine the applicability of the Explanation to sec. 271(1)(c). 3.1 He also placed reliance on the High Court's rulings for the proposition---(a) when original return is followed by a revised return showing a higher income, the act of concealment was complete when original return was filed, as held by Calcutta High Court in Kumar Jagadish Chandra Sinha v. CIT [1982] 137 ITR 722; (b) when assessee admits of concealment of income and addition is made on that basis, such an admission of concealment is relevant evidence for imposition of penalty, as held by the Kerala High Court in India Sea Foods v. CIT [1978] 114 ITR 124; (c) fiction created by the Explanation to sec. 271(1)(c) of presumption and when the assessee adduces no fresh evidence, the onus on the assessee is not discharged and penalty was leviable, as held by Allahabad High Court in CIT v. M. Habibullah [1982] 136 ITR 716/10 Taxman 216 and Punjab & Harayana High Court in Vishwakanna Industries v. CIT [1982] 135 ITR 652 (FB); (d) books found during search and additions made based on the seized books, the levying of penalty was held to be valid by Madras High Court in CIT v. E. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. Mansa Ram & Sons [1977] 106 ITR 307; (b) the doctrine of promissory estoppel as propounded by the Supreme Court in Union of India v. Godfrey Philips India Ltd. [1986] 158 ITR 574; and (c) when a disclosure is made voluntarily penalty was held to be not leviable by the Madhya Pradesh High Court in CIT v. Punjab Tyres [1986] 162 ITR 517. 5. We have given our very careful considerations to the rival submissions and also to the various materials that have been placed on our record. Considering these facts and the arguments of the parties before us, the issue to be resolved is whether the CIT had the power to waive off the penalty, and whether, it could be inferred from the facts and the circumstances of the case that the CIT could have consented to waive off the penalty. To resolve this issue we have to necessarily examine the provisions relating to the power of the CIT regarding the waiver or reduction of penalty, as contained in the Act and whether such a power is an unfettered power or there are any parameters and conditions attached for exercise of such a power. 5.1 The relevant provisions as contained in sec. 271(4A) and (4B) as was in force till30-9-75and sec. 273A which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de full and true disclosure of such particulars ; (c) ........... and also has, in all cases referred to in clauses (a), (b), and (c), co-operated in any enquiry relating to the assessment of his income and has either paid or has made satisfactory arrangements for payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year. Explanation: For the purposes of this sub-section a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income is of such a nature as not to attract the provisions clause (c) of sub-section (1) of section 271. (2) Notwithstanding anything contained in sub-section (1),---- (a)..... or (b) if in a case falling under clause (c) of sub-section of section 271, the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees, no order reducing or waiving the penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater to the detection of incomes, which were found to have been excluded from the original assessment and therefore the case of the assessee does not fall within the first of the parameters as in sections 271 (4A) and 273A of the Act. The second parameter of disclosure being made in good faith can perhaps be taken to have been fulfilled. The third parameter of the total amount of penalty should not be more than Rs. 50,000 for the Commissioner to allow the waiver is also not satisfied for the total amount exceeds Rs. 1 lakh for the three asst. years 1973-74 to 1975-76 and it required the approval of the Board. The fourth parameter of the total amount of incomes should not exceed Rs. 5 lakh can perhaps be held to be satisfied for the assessment year 1976-77. The fundamental parameter of the disclosure should have been before any detection by the ITO not being satisfied, and the total amount of penalty for the three asst. years 1973-74 to 1975-76 being more than Rs. 50,000, the Commissioner does not have any power at all for waiver or even for reducing the penalty. As far as assessment year 1976-77 is concerned the explanation had added an additional condition that needed satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds one hundred thousand rupees, no order reducing waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by the Commissioner except with the previous approval of the Board. " This also goes to indicate that the Commissioner could not have consented to the prayer of the assessee for not to levy any penalty since the aggregate amount of the penalty for the four assessment years being Rs. 1,48,526, which being more than Rs. 1 lakh, the Board's approval being the prerequisite, before expressing his consent of waiver or compounding. The above decidedly indicates that the Commissioner does not have any power which is absolute and unquestionable but the Act provides clear parameters and conditions within which he can act, for which action also, he has to give his reasonings and wherever the Act requires that he shall have to seek the consent or approval of the Board, he has to necessarily obtain the same before expressing any opinion about waiving off or reducing the penalty. In the present case as the facts exist on record, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [1973] 87 ITR 421 and reiterated the proposition that it is for the Tribunal to decide the questions of fact and on a reference the High Court could not go beyond the Tribunal's finding of facts. It was held that the finding of the Tribunal was based on the evidences on record and was not as a result of any conjecture or surmises. It is thus clear that this ruling of the Supreme Court is not an authority for the proposition preferred by the assessee that in all cases of surrender of incomes, penalty could not be levied. 5.5 The other ratio of Allahabad High Court in Mansa Ram & Sons' case relied upon by the assessee for the proposition that in cases of surrender of incomes subject to the condition that no penalty is levied is also misplaced. In this case for the asst. year 1951-52 the assessee had shown a payment of Rs. 50,000 to a party which the assessee admitted to be non-genuine but chose to surrender the amount as its income as desired provided no penalty was imposed. The finding of the High Court was that the surrender did not appear to be voluntary for the assessee had so written to the ITO that it is surrendering the amount as income as desired and therefore the concealm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the explanation offered by the assessee had not been substantiated by it. We may also observe that the ITO had established clear links between the duplicate books with the regular books in the shape of bills of sale, payments and also the receipts of cash not figuring in the regular books. This can also be held to mean that the explanation offered by the assessee that the account books seized belonged to the three persons, and not to its business transactions is obviously false. We are therefore of the view that in the instant case, not only all the three presumptions as contained in the explanation to sec. 271(1)(c) are attracted but they have not been rebutted by the assessee. Therefore the amount added to the income would have to be deemed to represent the income the particulars of income have been concealed. We may also observe that as per the provisions contained in sec. 275 which prescribe the time limit of imposition of penalty, there is no restrictive clause to await the CIT's order u/s 273A. Therefore, because the assessee had sought the CIT for not to levy any penalty on it for concealment, it does not go to imply that all other proceedings under the Act are frozen from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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