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TMI Blog1989 (10) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... 15-3-1977 to the abovementioned Dharmanagar party. The assessee took time again and again. In the assessment order, it is seen that the assessee vehemently urged that there was cash sale to the above party as per its books regularly maintained by it and the assessee also contended that it would produce persons and other materials to show that there were cash sales as such. But at the later stage, this assessee on 15-12-1979 wrote to the ITO amongst other things, stating that Rs. 24,250 was received in cash, but as the same was not believed by the ITO, the assessee had no further evidence to produce and requested the ITO to close the matter without burdening the assessee with onerous obligation of adducing further evidence in addition to what had already been produced. The assessee further requested the assessee to complete the assessment according to the provisions of the Act and was ready to pay extra tax. 3. In the assessment order, the ITO mentioned that it was apparent that the assessee was not willing to produce evidence etc. as stated by Shri Ashit Kumar Banik earlier on behalf of the assessee. The assessee also wrote to the ITO that it was not in a position to produce cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was very much threatened in the disturbed condition prevailing in the State and in view of the desires of the assessee to see through peace and for maintaining good relationship with its customers. It was also submitted by the assessee that the assessment of the above amount did not tantamount to admission of any particulars of income concealed and as such no penalty could be imposed on the firm. 5. The ITO mentioned and considered the explanation of the assessee and the statement of the purchaser Shri P.K. Biswas who has disproved the claim of the assessee that the sales were made in cash on 15-3-1977. The ITO inferred that the assessee's attempt was to convert the credit sale into cash sale to camouflage introduction of secret funds in the books of account, which attracted the provisions of section 271(1)(c). The ITO found that the entries in the books of the assessee had been proved to be incorrect and false on verification and, therefore, the assessee has furnished inaccurate particulars as contemplated by section 271(1)(c). 6. The ITO also considered the contention of the assessee that the assessee came forward and offered the amount for assessment and, therefore, it cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and had in fact furnished inaccurate particulars and, therefore, the penalty provisions have been correctly applied by the ITO which was wrongly cancelled by the CIT(A) without considering the materials as well as the principles of law involved. On behalf of the revenue, reference is made to a decision of the Hon'ble Madras High Court in the case of Rathnam Co. v. IAC [1980] 124 ITR 376 in which on the facts of that case, the penalty imposed under section 271(1)(c) was sustained after considering the point that the assessee had agreed to the addition to the low gross profit disclosed and, therefore, there was concealment as the penalty provisions did not depend on consent or otherwise of the assessee. It is, therefore, pressed by the learned Departmental Representative that there was absolutely no justification for the CIT(A) to cancel the penalty order on the basis of those decisions relied on by the CIT(A), without even considering that the facts and circumstances of those decided cases which were different. It is urged, therefore, that the order of penalty may be restored. 9. The assessee's learned counsel, on the other hand, supports the order of the CIT(A) stressing the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the ITO that he would not impose any penalty. It was observed that even in the absence of any material on record, one has to give regard to normal human conduct and it was reasonable that the assessee would not agree to an enhanced assessment unless he had been motivated by a cogent reason. 10. The assessee's learned counsel has also placed reliance on the decision in the case of CIT v. Narang Co. [1975] 98 ITR 462 as decided by the Hon'ble Delhi High Court, in which the facts were different from those of the present case before us and in which the penalty order was not sustained as the Appellate Tribunal accepted the explanation of the assessee in the penalty proceedings and as the assessee had not received back the goods and there could be no mala fide intention to suppress the value of the goods from the closing stock. Further reference is made to a decision of the Hon'ble Mysore High Court in the case of D. Halappa Sons v. CIT [1974] 95 ITR 542 in which the provisions of the Explanation to section 271(1)(c) as applicable for that year concerned was dealt with. It was held that no penalty could be imposed merely on the concession of the assessee or his representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee have to be taken prima facie as correct. But in the present case, the alleged payer had categorically stated in a statement under section 131 before the ITO that no cash payment was made by his firm to this assessee on that date, as the order was placed with the assessee for supply of 45 bundles of GIC sheets etc. and on receipt of the credit memo at a later stage, the amount was paid on 5-4-1977 to this assessee, when that party found that the goods were already received by his firm and entered in the stock register. It was pointed out that the credit memo sent by the assessee were received at Dharmanagar and as per postal mark on the cover, the papers were registered at the Fancy Bazar Post Office on 16-3-1977. We find no contradiction from the assessee to this fact nor there was any material to point to a different direction. If the assessee had actually sold those items and received payment in cash on that very date, i.e., on 15-3-1977, then there was no necessity to issue credit memos for cash sales and which were sent to the assessee at Dharmanagar through registered post as stated by the Dharmanagar party. It is seen that the Dharmanagar party received two cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us obligation for producing evidence etc. The assessee had also stated that it did not want to be given further opportunity to produce the withnesses and rather the assessee should be exempted from producing any such witnesses. It was specifically stated by the assessee that the above sum be treated as the firm's income for the assessment year 1977-78 and had no objection to pay extra tax on the inclusion of such income. Of course, the assessee in that letter requested the ITO to exempt the assessee from penalty proceedings. 13. As observed by the Hon'ble Madras High Court in the case of Rathnam Co., applicability of penal provisions does not depend on consent or otherwise of the assessee. It is open to any assessee to surrender any amount for addition to the assessment either voluntarily or persuasively. But as far as the penalty provisions are concerned, we are of the opinion that the ITO would not have any jurisdiction to enter into a contract with the assessee to impose or not to impose any penalty, as imposition of penalty or otherwise depends on the facts and circumstances of the case of a particular situation for which there are guiding principles enunciated by different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed for those amounts. But the facts of the present case before us is that the assessee categorically stated before the ITO that the books had been maintained in a regular course of business and that there was cash sales on that date to the Dharmanagar party and in fact time was given by the ITO to produce those materials and witnesses which the assessee wanted to produce. But when the ITO insisted of production of those materials, etc., the assessee resiled back from the previous stand and made the above request to the ITO. Thus, it could be seen fairly that had the ITO accepted the first contention or explanation of the assessee, then the above amount of Rs. 24,250 would have escaped assessment for the year, as mentioned earlier. Such request of the assessee cannot be said to be voluntary or bona fide as the request had been made obviously when the assessee was in a tight position. The assessee in the present case could not even show that the cash was actually received on that date as evidenced by the books and had actually made the disbursement out of such sale proceeds. When the ITO asked the assessee to place materials in support of such contentions, the assessee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantiate, then the amount added or disallowed in computing the total income of such person, shall be deemed to be the income in respect of which, the particulars have been concealed. But it is seen that the authorities below have not considering the provisions of the Explanation as amended and as applicable to the assessee for the year under consideration. In such a situation, the Appellate Tribunal has the obligation to take that provision of the law into consideration. In this connection, it would be useful to refer to a decision of the Hon'ble Andhra Pradesh High Court in the case of CIT v. Chandulal [1985] 152 ITR 238/20 Taxman 111 in which on the facts of that case, it was noticed that the Appellate Tribunal had not considered whether the Explanation to section 271(1)(c) was applicable to the facts of the case. Accordingly, the matter was remanded to the Tribunal as directed by the Hon'ble High Court. Similar is the view of the Hon'ble M.P. High Court in the case of Sayabati Sharma [1982] 12 TLR 165. 19. In view of the above position, we have to examine the case of the assessee, visa-vis, the above provisions. The assessee originally explained that there was cash sales on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a whole keeping in view the decision of the Hon'ble Supreme Court in the case of Choudhary Sahu v. State of Bihar AIR 1982 SC 98 and also in another decision in the case of Mahendra Manilal Nanavati v. Sushila Mahendra Nanavati AIR 1965 SC 364 as decided by the Hon'ble Supreme Court. A similar view was expressed by the Hon'ble Supreme Court yet in another case of Nagindas Ramdas v. Dalpatram Iccharam alias Brijram AIR 1974 SC 471. Since the assessee had admitted that the income related to the assessment year 1977-78, there was nothing for the ITO to prove or disprove the claim of the assessee in the circumstances. Of course, as mentioned earlier, the assessee has written to the ITO to exempt the assessee from penalty proceedings. This request for exemption from penalty proceeding has not been made a condition for the assessee for offering of the above amount to tax. Request for exemption of the penalty proceeding is an independent and a separate request of the assessee. There is no live link between the two. Even otherwise, as mentioned by us earlier, the ITO is not entitled to make a contract with an assessee to initiate or not to initiate penalty proceedings as such proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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