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TMI Blog2015 (12) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... nt enquiry in penalty proceedings and simply relying upon the conclusion drawn in assessment order thus the penalty deserves to be deleted. 1.3 That the assessee has voluntarily surrendered the income and paid the due tax thereon thus there remained no income on which tax sought to be evaded could be calculated which fact was not appreciated by the ld. CIT(A).'' 2.1 Brief facts of the case are: assessee is an individual running a proprietorship concern in the name of M/s Radha Marbles at Kishangarh dealing in the business of slabs, marble & granite tiles. During the course of assessment AO observed that in respect of following trade creditors as on 01/04/2006 there were opening credit balances of Rs. 18,34,178/- a sum of Rs. 2,45,,000/- was received from few parties in this year besides making payments to some parties: Sl. No. Name of parties Opening balance as on 1.04.2006 Receipt During the year Payment made during the year Balance outstanding as on 31.03.2007 1. Alka Marble, Kishangarh 6,08,355/- - 2,53,500/- 3,54,855/- 2. M/s. J.K. Marble Industries, Kishangarh 6,81,279/- - 2,53,500/- 4,27,779/- 3. Shiv Traders 2,75,771/- - - 2,75,771/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. Under these compelling circumstances, assessee offered this amount also for taxation to buy the peace of mind and to avoid any litigation. The surrender was made without realizing that except Rs. 3,58,141/- rest of the amount was opening balance not taxable in this year. The AO initiated penalty proceedings in this behalf for which a detailed explanation was filed by assesse pleading that it was not a fit case for levy of penalty. The AO without appreciating the merits of explanation and glaring facts that maximum credit amounts were opening balances; and rejecting the surrender as not voluntary held that assessee concealed income and furnished inaccurate particulars & imposed the impugned penalty. 2.2 Aggrieved, the assessee preferred first appeal before the ld. CIT(A) where it was contended that assessee's surrender was factually rejected by the AO himself. No independent inquiry during the course of penalty proceedings was made. The AO though rejected the surrender however the penalty was imposed solely only relying on the surrendered amount. The Assessee pleaded that assessment proceedings and penalty proceedings are distinct and for imposition of penalty proper enquiries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries without proper cross verification as assessee had no control over the books of unrelated third parties. (v) Reliance is placed by the assessee counsel on catena of judicial pronouncements including the following for the proposition that penalty u/s 271(1)(c ) cannot be levied in these facts and circumstances:- a. CIT v Sureshchandra Mittal 251 ITR 9 (SC) b. Gebilal Kanhaiyalal (HUF) v. ACIT 270 ITR 523 (Raj) c. CIT v Badrilal Chaturbhuj 265 ITR 329(Raj) (vi) Penalty proceedings are separate and distinct from assessment proceedings and mere fact that income has been offered for taxation will not tantamount to admission of furnishing inaccurate particulars without properly examining the explanation and circumstances in this behalf. (vii) All the relevant particulars were furnished along with the return of income, parties are old and opening balances have been accepted in preceding year. With all these undisputed facts on record, imposition of penalty without any enquiry in independent proceedings is untenable. Reliance is placed on Hon'ble Supreme court judgment in the case of Reliance Petro Products 322 ITR 158. (viii) The assessee has surrendered the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is behalf is possible in this year. 2.5 The ld. AR further submitted that once AO himself held that the surrender is not acceptable as it was not voluntary, in that case he was under obligation to make regular enquire of the issues and verified the right taxability in the year in accordance with law. In that case maximum amount was no assessable as income in this year. Consequently the initiation and conclusion of the fate of assessment and penalty proceeding would have been in relevant year and not in this year. Thus from correct perspective the impugned additions have been made in wrong year and penalty also has been imposed in wrong year. Assessee honored her commitment by accepting the assessment it does not mean that penalty will be automatically imposed without considering these crucial aspects. Though not raised in quantum proceedings assessee has a statutory right to raise the plea for addition in correct year of taxability as well as imposition of penalty. Therefore, the penalty has been imposed without appreciating the relevant issues properly. Sec.271(1)(c) obliges the AO to consider assessee's reply in objective manner along with facts, circumstances and law and therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re by the assessee to give an explanation. However, the addition made on this count automatically cannot justify the penalty levied u/s 271(1)(c). Hon'ble High Court further held that for levy of penalty u/s 271(1)(c) two factors must co-exist - (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. It is not enough for the purpose of penalty that the amount has been assessed as income and (ii) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation - 1 to section 271(1)(c) has no bearing on factor No. 1 but has a bearing only on factor No. 2. The explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. If the assessee gives an explanation which is unproved but no dis-proved i.e. it is not accepted but circumstances do not lead to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of amounts on which such penalty has been levied is opening balances and does not represents the transactions entered into by the appellant during the impugned assessment year and the books of accounts were not doubted nor the trading results declared were disturbed. Therefore, it is prayed that the penalty of Rs. 14,42,682/- as imposed u/s 271(1)(c) deserves to be deleted. 2.8 Further Case laws relied upon by the assessee are as under:- 170 Taxman 471 CIT Vs. Ashok Taker (Delhi) Penalty For concealment of income: - Assessment year 1998-99 - During assessment proceedings, assessee surrendered certain amount for taxation and submitted that same was done in order to buy peace - Assessing Officer added back said amount to income of assessee and also initiated penalty proceedings against him under section 271(1)(c) - Commissioner (Appeals) found that besides factum of surrender of income by assessee, Assessing Officer had failed to bring any other material on record to show that surrendered income was concealed income and, therefore, initiation of penalty proceedings was not warranted in law - Tribunal upheld said order - Whether order of Tribunal was to be upheld - Held, yes. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on the AO because the assessing authority cannot make a promise against statue. But when there is a discretion with the AO, then, such legitimate expectation should be fulfilled as the principle of estoppels can be applied only when there is no discretion. 131 ITR 619 Additional Commissioner of Income-tax v. Aggarwal Misthan Bhandar (Raj.) Penalty--Concealment of income--Assessee, a small trader, doing halwai business--Net profit declared very low--Estimated higher assessment made by ITO accepted by assessee to avoid disputes by way of appeals, penalties, etc.--Tribunal finding that such books of account as were possible or practicable in such business was maintained--No manipulation or other indication of concealment of income pointed out by Department--Cooperation extended in completing assessment does not amount to confession of concealment of income--Levy of penalty not valid--Income-tax Act, 1961, s. 271(1)(c). 308 ITR 33 (AT) Star International P. Ltd. v. Assistant Commissioner of Income-tax (Lucknow) Penalty--Concealment of income or furnishing of inaccurate particulars-- Commission paid to artisans on sale of machines by bearer cheque--Nothing on record to show cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried over trade credits from earlier year, corresponding purchases were included in trading a/c thus legally speaking if trade credits are added as cessation of liability, the relevant entries exist in books and if they are held as bogus then they belong to earlier years. Besides relevant information is furnished along with return of income. ii. Though surrendered in assessment the assessee can take fresh pleas in the penalty proceedings which by settled law are distinct and separate. Assessee can make fresh submissions and lead fresh evidence. AO can take fresh investigations on the basis of new pleas and material. Thus when surrendered is technically rejected and assessee gives reasonable explanation, penalty can be imposed not on the sole basis of alleged refused surrender. AO has a duty to consider the material and submission of the assessee and decide whether income on the basis of these pleas was assessable in the year in question. iii. AO has held that the surrender is not acceptable and chose to add it u/s 41(1) of the Act. Thus technically even the surrender is not accepted and unilateral cessation of liable is assumed ignoring the plea that in subsequent years t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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