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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 ..... t or furnishing of inaccurate particulars alone the assessee does not, ipso facto, become liable to a penalty but he has a right to explain against the same. Not only is the levy of penalty discretionary in nature but also the discretion has to be exercised keeping the relevant factors in mind and the approach of the Assessing Officer must be fair and objective. The acceptance of a particular amount of income or offering additional income by the assessee and not filing appeal against any such addition would not itself lead to levy of penalty under section 271(1)(c) of the Act. The standard of proof for making quantum addition and for levy of penalty, are entirely different. A penalty provision accepts reasonable cause as provided in section 273B of the Act - 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 attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finalisation of accounts for the financial year 2005-06." The assessee offered Rs. 3 crores in respect of certain omissions/mistakes regarding missing vouchers, etc., during survey. The assessment was completed on December 31, 2008 in which addition of Rs. 3,08,11,310 was made and the total income was assessed at Rs. 5,14,24,693. These additions included income disclosed by the assessee of Rs. 3 crores, disallowance under section 40(a)(ia) of Rs. 7,81,446, disallowance under section 14A of Rs. 17,664 and disallowance under section 40A(3) of Rs. 12,200. Since the assessee-company had not returned the correct income in the return filed on January 31, 2008, and only during the survey it had offered Rs. 3 crores, penalty proceeding under section 271(1)(c) of the Act was initiated by issuing notice under section 274 of the Act. The assessee filed a reply dated June 2, 2009 against the proposed action on June 4, 2009, requesting for dropping of the penalty proceedings on the ground that the assessee had offered additional income of Rs. 3 crores during the course of survey despite survey team had not found any defect much less any specific defect in the books of account. But being not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the learned Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer restored." We have considered the rival submissions and have carefully perused the entire material available on record. It was argued by the learned Commissioner of Income-tax/Departmental representative, Shri P. B. Sekaran, that the assessee had offered Rs. 3 crores consequent to the survey proceedings only ; had there been no survey, the assessee would not have disclosed this income and would not have paid requisite tax thereon. Thus, according to him, the assessee has either concealed the particulars of income or has furnished inaccurate particulars thereof and consequently, is exigible to the impugned penalty. He has supported his contention with some decisions and has also relied on the decisions mentioned in the grounds of appeal. Finally, he has pleaded for setting aside the appellate order and restoration of the penalty. On the other hand, the learned authorised representative, Shri S. Sridhar, advocate, has vehemently controverted the arguments of the learned Commissioner of Income-tax/Departmental representative by clamouring that the Assessing Officer was not even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement 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 the few computers including the one in which the books of accounts were maintained were crashed due to virus during December, 2004.' (iii) For the relevant assessment year, i.e., 2006-07, the assessee has filed its return only on February 6, 2008. The audit report is dated January 31, 2008 and in the audit report, the assessee's auditor has again qualified the report 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 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 the few computers including the one in which the books of account were maintained crashed due to a virus 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed is true and correct." The perusal of these paragraphs evinces that this penalty is levied on account of non-furnishing of bank reconciliation statement and assessee's non-co-operation. Moreover, paragraph VII reproduced above, explains as to why no penalty under section 271(1)(c) of the Act can be imposed in this case. In the penalty order, it is not certified as to on what reason-whether on account of concealment of income or on account of furnishing inaccurate particulars of income, is being levied. Under the provisions of section 271(1)(c) of the Act, it is the statutory duty of the Assessing Officer to specify as to what is the reason for levy of penalty under section 271(1)(c). Under this section a penalty can be levied only if the assessee has either "concealed the particulars of income" or has "furnished inaccurate particulars of income" or has committed both defaults. These two defaults are different and do not overlap on each other. However, both refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of either suppressio veri or suggestio falsi. The levy of penalty under this section is not automatic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 ITR 9 (SC), is relevant in this regard. In this case, it has been held that when the assessee filed a revised return showing higher income with a view to buy peace and to avoid further litigation, penalty cannot be imposed merely on account of higher income having been subsequently declared. With the cumulative effect of our foregoing discussion and relying on the above decision, we can safely hold that there is no merit in the appeal of the Revenue. If we accept this appeal, it would lay down a wrong precedent where any or every addition, made to the declared income, would result in automatic levy of penalty which proposition is against the established cannons of law and the express provision of section 273B of the Act. The decisions on which the learned Commissioner of Income-taxDepartmental representative has relied are not applicable to the facts of this case. The decisions in the cases of K. Mahim [1984] 149 ITR 737 (Ker) and K. P. Madhusudhanan [2001] 251 ITR 99 (SC), are just based on contrary facts. The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X
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