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TMI Blog1997 (9) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... king inIndiaat different places or work sites. 3. The survey operation under section 133A was conducted on the employer-company on8-7-1988. Thereafter search operations under section 132 of the Income-tax Act were conducted on19-7-1988. The proceeding of search was once again carried out on2nd March, 1990. During the course of search proceedings, various incriminating records, books of account and other documents were found and seized. These documents revealed that the salary value of perquisites and other benefits disclosed by the employees of the said employer-company in their original return of income did not reflect the actual payments made to them. The completed assessments for various years in the cases of these employees were reopened either under section 143(2)(ii) or under section 148 of Income-tax Act, 1961. 3.1 After the search, the employer company GEC filed a settlement application before the Deputy Director of Investigation, Unit-IV, as well as to the Director of Investigation, New Delhi vide application dated 23rd July, 1990 and paid taxes on the basis of settlement application with regard to the employees whose salary, perquisites, etc., had been originally shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the Department has filed applications for reference to the Tribunal under section 256(1) which were pending at that time before the Tribunal. The Assessing Officer, therefore, observed that the order of the Tribunal has not become final. He accordingly levied penalty under section 271(1)(c) on the entire amount of addition including those additions which were made by the Assessing Officer in the fresh assessment orders/reassessment orders made after the search but were deleted by the Tribunal in the quantum appeal. 4.2 These assessees preferred appeal before the CIT(A) against levy of such penalty under section 271(1)(c) of Income-tax Act, 1961 (for short referred to as 'Act'). 5. The CIT(A) in the appellate order passed in various cases mentioned at Sl. Nos. 1 to 28 held that the orders passed by the ITAT in the quantum appeal were binding on the Assessing Officer as long as the same were not set aside or reversed by a higher judicial authority. Therefore, he held that the levy of penalty under section 271(1)(c) in respect of additions reduced or deleted by the ITAT in the quantum appeal is not justified. He directed the Assessing Officer to delete the penalty levied in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that the appellant neither concealed nor furnished inaccurate particulars nor made an unsubstantiated claim. The appellant had only acted on the representation by the employer thus no penalty is leviable. 3. The appellant craves leave to add, amend, alter or vary the above grounds of Appeal." 5.4 In the appeals of various assessees mentioned at Sl. Nos. 29 to 76, the Assessing Officer had issued notices under section 148 after the search operations were conducted at the premises of the employer-company. The assessees in these cases informed the Assessing Officer that the returns filed earlier by them may be treated as return filed in pursuance of the notice under section 148. The Assessing Officer completed the fresh assessment orders on the basis of facts and information obtained as a result of search and subsequent investigation made thereafter. The Assessing Officer also levied penalty under section 271(1)(c) in all these cases in respect of income, of which particulars were concealed by these assessees. The CIT(A) in these cases confirmed the penalty levied under section 271(1)(c). While confirming the said penalty, the CIT(A) observed that these assessees could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that the appellant neither concealed nor furnished inaccurate particulars nor made an unsubstantiated claim. The appellant had only acted on the representation by the employer thus no penalty is leviable. 3. The learned CIT(A) has grossly erred in rejecting the appellants contention that the Assessing Officer in the absence of the original return has no material to reassess or impose penalty under section 271(1)(c). 4. The appellant craves leave to add, amend, alter or vary the above grounds of appeal." A perusal of the aforesaid grounds reveal that only ground No. 3 raised in these appeals is an additional one raised in these appeals mentioned at Sl. Nos. 29 to 76 as compared to the grounds raised in the appeals mentioned at Sl. Nos. 1 to 28. 6.1 Shri R. Ganeshan, the Ld. C.A. appearing on behalf of these assessees vehemently contended that the CIT(A) has erred in sustaining the penalty levied in all these cases. He argued that penalty orders passed by the Assessing Officer along with Annexure A annexed with the said penalty orders clearly indicate that the entire discussion relate to levy of penalty on those items of additions which have been deleted by the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce and paid to the Government, the employees also agreed to make payment of such higher tax. This cannot amount to any admission as to existence of any concealed income in the hands of these employees. The Ld. Counsel also placed reliance on decision of the Tribunal reported in Parasmal Parekh v. Asstt. CIT [1996] 58 ITD 34 (Jp.). 6.4 The Ld. Counsel further contended that even if it is assumed that the employer-company had agreed to certain higher figures of salary and perquisites allowed to its employees, no penalty can be levied in respect of such agreed amounts in view of the judgment of the Hon'able Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705/33 Taxman 460A. 6.5 The Ld. Counsel also invited our attention towards reply submitted to the Assessing Officer in the course of penalty proceedings under section 271(1)(c). He also drew our attention towards various paras of the orders passed by the Tribunal on6-1-1994in the quantum appeals with a view to show that the various disputed items of additions in respect of which the Assessing Officer has levied the penalty, were deleted by the Tribunal. These submissions were made with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Revenues,U.K.was furnished which shows monthly payment of salary paid to the employees, which tallies with the statements enclosed with the settlement petition. 7. The Ld. D.R. submitted that the assessee has not furnished any explanation to justify the difference between the figures shown in the original return and the figures disclosed by the employer-company in the settlement application. TheLd. DR.submitted that the filing of the inaccurate particulars of income in the original returns was deliberate and it was wilfully done. The moment search operations were carried out, the employer-company made disclosure of higher payments of salary and perquisites which they had already disclosed earlier to the Inland Revenue Authorities inU.K. 7.1 The Ld. D.R. relied upon the following judgments to support his contention that penalty confirmed by the CIT(A) is justified: (a) Tube Fabrico (I.) Ltd. v. CIT [1994] 210 ITR 1035/73 Taxman 198 (Delhi) In this case, it was held by the Hon'ble Delhi High Court that the assessee could not plead an agreement because there could be no agreement or estoppel against a statute. When the statute itself cast a liability on the assessee, no agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 7.2 The Ld. D.R. further submitted that the Assessing Officer has validly initiated penalty proceedings under section 271(1)(c). He has not initiated such penalty proceedings with reference to specific items of additions made by the Assessing Officer. The Assessing Officer has specifically mentioned in the penalty order passed under section 271(1)(c) in all these cases that the assessee has concealed the particulars of his income while filing the original return. It cannot, therefore, be validly contended that the CIT(A) has confirmed the penalty on a charge different than the charge on which the Assessing Officer had levied the penalty. 7.3 The Ld. D.R. also pointed out that the CIT(A) has not varied the charge on which penalty has been sustained. The CIT(A) has merely reduced the amount of penalty to the advantage of the assessee in respect of those items of additions, which have been deleted in the quantum appeal by the Tribunal. The judgment of Hon'ble Gujarat High Court and Calcutta High Court relied upon by the Ld. Counsel for the assessee are not at all applicable on the facts of the present case. 7.4 During the course of hearing of the aforesaid appeal, the Ld. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the items in question was not believed to be true. The Finance Act, 1964 introduced an explanation at the end of sub-section (1) of section 271 which provides that where the total income returned by any person was less than 80% of the total income assessed, the onus was on such person to prove that the failure to file the correct income did not arise from any fraud or any gross or wilful neglect on his part and unless he did so, he should be deemed to have concealed the particulars of his income or furnished inaccurate particulars for the purposes of section 271(1)(c). Another change was brought into being which is effective fromApril 1, 1976. The then existing explanation was taken away from the statute and instead as many as four explanations have been enacted to section 271(1) prescribing different deeming provisions. Explanation 5 was added in 1984, Explanation 6 had been added in 1989 with which we are not presently concerned. 8.3 It is patent that the new Explanation I inserted with effect fromApril 1, 1976, has been designed to get over, by legislation, what the Hon'ble Supreme Court in its wisdom laid down to be the law in the case of Anwar Ali. The new Explanation I p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Act as well as the principles of law enunciated in the various judgments relied upon by the Ld. representatives of the parties. 9.1 The contention of the Ld. counsel for the assessee that the penalty has been sustained by the CIT(A) on an entirely different charge is not at all valid on the facts and circumstances of the present case. The Assessing Officer had initiated the penalty proceedings under section 271(1)(c) for concealment of income and for furnishing of inaccurate particulars in terms of section 271(1)(c) and not with reference to any particular item of concealment of income. The satisfaction recorded by the Assessing Officer while initiating the said penalty, therefore, clearly covers within its ambit, the entire amount of difference between the income shown in the original return and the income finally assessed. Explanation I to section 271(1)(c) is clearly applicable on the facts of the present case. The CIT(A) did not sustain the penalty on a new or a different item of addition. He merely reduced the amount of penalty by directing the Assessing Officer to delete the penalty in respect of those items of additions, which have been deleted in the quantum a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) in the appeals mentioned at Sl. No. 1 to Sl. No. 28 has held that difference between the income, i.e., salary and value of perquisites, stated in the original returns filed and the income determined under the same heads after giving effect to the orders of ITAT would be the concealed income of the appellants. The penalty levied by the Assessing Officer was restricted to the quantum of penalty imposable under section 271(1)(c) in relation to such difference in the figures of income. The CIT(A), however, deleted the penalty imposable on the amounts added to the income of the assessee while completing the assessment under section 143(3), but subsequently deleted by the ITAT. 9.3 It will, therefore, be imperative to go through the orders of the Tribunal in the quantum appeals rendered in the cases of 23 employees of the employer-company vide above referred order dated6-1-1994. The Tribunal, inter alia, gave the following findings in the aforesaid order:--- From para 12 at page 17 of the order: "At page 172 of the paper book, a statement filed before the Inland Revenue,U.K.was furnished which shows monthly payment of salaries paid to the employees which tallies with the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect that the amounts disclosed in the settlement petition, were grossed up figures. We confirm the action of the Department insofar as adoption of those figures are concerned as salary paid to the assessees herein. But we find no justification for the addition of any further sum to those figures as there is no proof of payment of those sums to them either inU.K.or inIndiaand further more what were paid actually were already included." From para 34 at page 44 of the order: "In any case we have elsewhere in this order held, that the various additions proposed by the Assessing Officer and confirmed by the Commissioner (A) were not in order and directed their deletion, which included the overtime, the overheads, living allowance, perquisites and tax perquisites and also directed the grant of standard deduction at Rs. 10,000 but confirmed the adoption of salary figures as disclosed in the settlement petition. It is now ascertained that the salary figures disclosed in the settlement petition included the salary mentioned in the contracts plus the increments and the overtimes actually paid. Therefore, for the purpose of' granting exemption under section 10(6)(viia), the salary figure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame, the presumption contained in these explanations will become a finding and levy of penalty would be justified. It is true that the said judgment relates to old explanation inserted by the Finance Act, 1964 but the ratio of the judgment will equally apply in relation to interpretation of the new Explanation-I added in section 271(1)(c). 10. In view of the aforesaid facts and discussions, we are of the view that the CIT(A) has rightly confirmed the penalty in respect of the difference between the income shown in the original returns and the income determined after giving affect of the order of the ITAT. Such findings cover the appeals mentioned at Sl. Nos. 1 to 28. 11. The facts relating to the appeals mentioned at Sl. Nos. 29 to 76 are almost similar. The only new ground which has been raised in these appeals is ground No. 3. No arguments were made by the Ld. Counsel for the assessee in respect of such a ground raised in these appeals. Such a ground raised in these appeals will not in any way effect the ultimate decision in these appeals also. It is an admitted fact that notices under section 148 were issued in all these cases. The assessee informed the Assessing Officer that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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