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TMI Blog2010 (3) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2006-07. The assessee had given explanation and reasons for revising the return, which was reproduced by the Assessing Officer in his order, which reads as under : "( i )Original return was filed on 26-8-2005 ( ii )Late Shri Shailesh Gandhi, brother of the assessee, was operating savings bank accounts (joint accounts) that were opened with Union Bank of India, Ghatkopar Br., details of which are as under : A/c. No. Opened on Name of account holders 17154 Prior to 31-3-2003 Rajesh Gandhi Alka Gandhi 76630 1-7-2004 Alka Gandhi, Rajesh Gandhi Kinjal Gandhi ( iii )The assessee being the younger brother used to handover signed cheque books to his elder brother and used to sign on papers that were put up to him by his brother. All stay in the joint family. ( iv )Shri Shailesh Gandhi expired on 18-4-2007 at the age of 51 years. After his sudden demise, the assessee and his family in the 1st week of August 2007, came to know about the investments made in the names of the assessee and his wife and the bank accounts. He approached the bank in August, 2007 and obtained du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the time-limit prescribed under the Act and during the pendency of the scrutiny assessment of the assessee under consideration. It was also noted by the Assessing Officer that the assessee claimed that the assessment is completed as per the revised return filed by him; thereby finding all his working and explanations to be correct is not acceptable as independent enquiries were carried out with the bank and details of the bank accounts were called for from the bank. Upon receipt of the bank statement, the assessee was asked to furnish the bank summary of both the accounts and explain each and every entry in the bank statement. Further Authorised Representative was asked to submit the working of total additional income offered in three years viz., assessment years 2003-04, 2004-05 and 2005-06 and income earned out of the additional income vis-a-vis stock of mutual fund, bank balance and a balancing figure. After verification of these submissions only the income as per revised statement was accepted. The Assessing Officer after considering the submissions and various decisions levied the said penalty observing that he satisfied that the assessee has concealed the particulars o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned AR submitted that the Hon ble Supreme Court nowhere stated that penalty is not discretionary. The learned AR submitted that mere surrender of additional income does not amount to concealment of income or furnishing of inaccurate particulars of income, for which he relied upon the decision of ITAT, Delhi Bench (Third Member) in the case of Addl. CIT v. Prem Chand Garg [2009] 31 SOT 97 (Delhi) (TM). The learned AR submitted that in the said decision the ITAT has also considered the application of judgment of Hon ble Supreme Court in the case of Dharamendra Textiles Processors ( supra ). The learned AR has also relied upon the following cases in support of assessee s case : ( i ) CIT v. Shankerlal Nebhumal Uttamchandani [2009] 311 ITR 327 (Guj.) ( ii ) CIT v. Sidhartha Enterprises [2009] 184 Taxman 460 (Punj. Har.) ( iii ) CIT v. Escorts Finance Ltd. [2009] 183 Taxman 453 (Delhi). 5.1 It is also submission of the learned AR that similar revised returns for assessment years 2003-04 and 2004-05 were filed but in these years penalty proceedings have been dropped by the Assessing Officer himself. The learned AR files copies of those orders of the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Shankerlal Nebhumlal Uttamchandani ( supra ), submitted that the High Court held that queries raised but no detection of undisclosed income and the assessee filing revised return surrendering amount standing in names of family members and the family members assessed on such income, no concealment of income and penalty could not be imposed under section 271(1)( c ) of the Act. 8. We have heard the learned representatives of the parties and perused the record as well as gone through the decisions cited. The crux of the matter to be examined in this case is whether surrender of additional income during the course of assessment proceedings amounts to concealment of income or furnishing of inaccurate particulars of income. In case of penalty under section 271(1)( c ), the revenue is heavily relied upon the judgment of the Apex Court in the case of Dharamendra Textile Processors ( supra ). 8.1 Income-tax is collected from taxpayers, who are having taxable income for the welfare of the State. The citizens are bound to pay such income-tax as it is a part of their duty to the nation. The income-tax is payable yearly on the annual taxable income, that means, this duty towards t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate particulars. In the absence of a clear finding as to the concealment of income furnishing inaccurate particulars, the initiation of penalty proceedings will be without jurisdiction. 8.2 The above view is also supported by the provisions of Explanation 1(B) of section 271 of the Act. According to us as per the provisions of Explanation 1(B) of section 271 of the Act, the burden is on the assessee to substantiate the matters stated in the Explanation, that it is settled position in law that there cannot be an estoppels against a statute. It is for the Department to consider the explanation offered by the assessee in respect of an amount which was offered as tax. It is not automatic that whenever an amount was offered by the assessee, penalty is to be levied. Therefore, in the penal proceedings which conceptually differ from assessment proceedings, the assessee can file an explanation justifying its action in not including a particular item of income in its return, though it may have offered the amount to be taxed subsequently, that if such an explanation is offered, the Department has to examine its acceptability and record a finding as to whether the explanation is ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had furnished false returns by not including the amount of freight in the taxable turnover disclosed in the returns. Now, it is difficult to see how the assessee could be said to have filed "false" returns, when what the assessee did, namely, not including the amount of freight in the taxable turnover, was under a bona fide belief that the amount of freight did not form part of the sale price and was not includible in the taxable turnover. The contention of the assessee throughout was that on a proper construction of the definition of "sale price" in section 2( o ) of the Madhya Pradesh General Sales Tax Act, 1958, and section 2( h ) of the Central Sales Tax Act, 1956, the amount of freight did not fall within the definition and was not liable to be included in the taxable turnover. This was the reason why the assessee did not include the amount of freight in the taxable turnover in the returns filed by it. Now, it cannot be said that this was a frivolous contention taken up merely for the purpose of avoiding liability to pay tax. It was a highly arguable contention which required serious consideration by the court and the belief entertained by the assessee that it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the returns and the Assistant Commissioner was not justified in imposing penalty on the assessee under section 43 of the Madhya Pradesh General Sales Tax Act, 1958, and section 9(2) of the Central Sales Tax Act, 1956. 7. We, accordingly, reject the appeals insofar as they are directed against the inclusion of the amount of freight in the taxable turnover of the assessee but allow the appeals insofar as they relate to imposition of penalty and set aside the orders passed by the Assistant Commissioner imposing penalty on the assessee." 8.4 We may refer following decisions which are directly on the issue : ( a )The Punjab Haryana High Court in the case of CIT v. Rajiv Garg [2009] 313 ITR 256 held as under : "Pursuant to the notice under section 148 the assessee filed the revised return of income showing higher income. The said return of income was accompanied by a note in which the assessee submitted that he surrendered the entire amount of sale proceeds of shares to buy peace of mind and to avoid hazards of litigation and also to save himself from any penal action. Later on, on the basis of revised return, the assessment was framed and the return submitted by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer treated the said loss under Explanation to section 73 and treated the same as deemed speculation loss. The Assessing Officer has apportioned the interest and other expenses attributable to speculation business income. Penalty under section 271(1)( c ) levied by the Assessing Officer has been cancelled by the ITAT following their another decision in case of Mimosa Investment Co. (P.) Ltd. [IT Appeal No. 2983/Mum./07 for assessment year 2004-05 order dated 15-1-2009] wherein it was held that the proceedings under section 271(1)( c ) can be initiated only if the Assessing Officer or the first Appellate authority is satisfied in the course of any proceedings under the Act. If he is satisfied as per clause ( c ) that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty the sum mentioned in sub-clause ( iii ) of clause ( c ). The expression used in clause ( c ) is has concealed the particulars of his income or furnished inaccurate particulars of such income . Therefore, both in cases of concealment and inaccuracy the phrase particulars of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided in the Act, according to the assessee for which he is entitled. The duty of the Assessing Officer is to assess real and correct income in accordance with law. The CBDT in its Circular No. 14 (XL35) of 1955, dated 11-4-1955, stated that officers of the Department must not take advantages of ignorance of an assessee as to his rights, it is one of their duties to assist a taxpayer in every reasonable way. On the basis of detailed discussions in this regard the ITAT observed that after furnishing particulars regarding determination of income the assessee has right to claim exemption and deduction according to him which are as per law .The Assessing Officer while discharging his duty allow or disallow assessee s claim and arrived at a different figure of total income then the total income declared by the assessee, that case cannot be said to be a case of furnishing inaccurate particulars or concealing of particulars of income." ( c )We may also referred relied upon the judgments cited by the learned AR in the case of Shankerlal Nebhumal Uttamchandani ( supra ) and Escorts Finance Ltd. ( supra ) in support of above view. 8.5 ( i ) In the case under consideration, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hairman, SEBI v. Shriram Mutual Fund [2006] 5 SCC 361 and was of the view that the basic scheme for imposition of penalty under section 271(1)( c ), section 11AC of the Act and rule 96ZQ(5) of the Rules is common. According to the Division Bench the correct position in law was laid down in Chairman , case [2006] 5 SCC 361 and not in Dilip case [2007] 8 SCALE 304 (SC). Therefore, the matter was referred to a Larger Bench." (p. 280). After referring to a number of decisions on interpretation and construction of statutory provisions, the court observed and held as follows : 28. In Union Budget of 1996-97, section 11AC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In para 136 of the Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the notes on clauses also the similar indication has been given. 29. The above being the position, the plea that the rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained. Dilip N. case [2007] 8 SCALE 304 (SC) was not correctly decided but Chairman , case [2006] 5 SCC 361 has analysed the legal position in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile case ( supra ) must, therefore, be understood to mean that though the application of section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. That is what Dharamendra Textile case ( supra ) decides. 8.5 ( ii ) The above view has been followed by the Punjab and Haryana High Court in the case of CIT v. Sidhartha Enterprises [2009] 184 Taxman 460 cited by the learned AR. 8.6 We noticed that the judgment in Dharamendra Textile Processors case ( supra ) is applicable in case where it was found that all the conditions laid down in the section 271(1)( c ) are satisfied. Once the section is applicable in that case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed as prescribed/determined under the section. In the light of above discussion we find that in the case under consideration conditions laid down in section 271(1)( c ) are not satisfied therefore pen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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