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TMI Blog2011 (7) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Dhawal Chandan, chairman and director of the company was recorded. In that statement, he had offered additional income of Rs. 3 crores on account of omissions/mistakes and missing vouchers. The assessee had filed a copy of audited accounts in response to notice issued under section 143(2) of the Act. The Assessing Officer had found that this report of auditor contained a qualifying statement which reads as under : "The company has not produced several vouchers for various expenses and bank reconciliation of bank statements. The management has explained to us that the company has misplaced such vouchers and bank reconciliation statement could not be prepared due to paucity of time to complete the audit due to enormity of transactions. Also it was explained to us that few computers including the one in which the books of account were maintained were crashed due to a virus attack during December 2004. As a result, the repreparation and finalisation of accounts for the financial year 2004-05 were delayed. Consequently this resulted in delay in finalisation of accounts for the financial year 2005-06." The assessee offered Rs. 3 crores in respect of certain omissions/mistakes rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that investigation by the Department is a foot, though nothing tangible had come into the possession of the Department at any particular point of time, may induce a dishonest assessee to submit a revised return and such an exercise will not absolve him of the consequences flowing from an act which on his part had already been completed, namely, the concealment of income or the particulars thereof. 2.4 The learned Commissioner of Income-tax (Appeals) ought to have upheld the penalty order of the Assessing Officer considering the decision of the Supreme Court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) which held that the assessee put to the notice, if does not prove, in the circumstances that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, and, consequently, be liable to the penalty. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer restored." We have considered the riv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This paragraph reads as under : "VII. The following facts are pertinent to the case : (i) It is noticed from Form 3CD along with the return of income for the assessment year 2004-05, the assessee has not produced several vouchers for various expenses and hence the auditor has in his report, qualified the audit stating that the management has explained to the company that the company has misplaced vouchers and hence bank reconciliation statement could not be prepared due to paucity of time to complete the audit and the enormity of the transactions. (ii) For the assessment year 2005-06, the assessee has filed its return only on March 30, 2006 along with the audited statements and the auditor has in the report again mentioned the following : 'The company has not produced several vouchers for various expenses and bank reconciliation of HDFC Bank, Chennai Branch, HDFC Bank, Mariam Centre, ABN Amro Bank, ICICI Bank and Centurion Bank. The management has explained to us that the company has misplaced such vouchers and the bank reconciliation statement could not be prepared due to paucity of time to complete the audit and the enormity of transactions. Also, it was explained to us that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bruary 2008 was filed on the basis of accounts in which bank reconciliation was not made." After that, the conclusion of the Assessing Officer is contained in paragraph VIII (page 4 of the penalty order) which reads as under : "VIII. From the facts of the case, it is evident that the assessee, by not furnishing bank reconciliation statements from all the banks even during the course of assessment proceedings, having disclosed additional income to the tune of Rs. 3 crores during the course of survey, has not co-operated in the full sense with the assessment proceedings and it cannot be held that the assessee has made a true and full disclosure of its income. If the survey had not taken place, the assessee would not have disclosed the additional income. The income returned originally was Rs. 1,98,66,617. The additional income disclosed at the time of survey was Rs. 3 crores. The income was assessed at Rs.5,14,24,693. By not filing bank reconciliation statements the assessee has not fulfilled its onus of proving that the income disclosed is true and correct." The perusal of these paragraphs evinces that this penalty is levied on account of non-furnishing of bank reconciliation stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the hon'ble Supreme Court rendered in the case of CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC), and that of the hon'ble Madras High Court rendered in the case of CIT v. Chandrakant M. Tolia [1996] 220 ITR 438 (Mad), are relevant. Further explanation of the assessee is that in spite of all the seized documents being in the possession of the Department, no addition apart from offered income of Rs. 3 crores has been made. It was also submitted that this offer was made only to buy peace of mind and avoid further litigation. In our considered opinion, this is also a mitigating factor. Any addition made on the basis of offer which is made despite there being any specific evidence and based on guesstimate of the assessee in order to avoid further litigation and to buy peace, cannot be made a ground for imposing penalty under section 271(1)(c) of the Act. The Explanation below 271(1)(c) of the Act will not apply in this case as nothing specific has been found by the Department even during survey which can attract any deeming provision which the assessee has to disprove. The decision of the hon'ble Supreme Court in the case of CIT v. Suresh Chandra Mittal [2001] 251 I ..... 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