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TMI Blog2007 (10) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... sed return filed by the assessee was not voluntary but it was filed after detection of the concealed income by the assessing officer. (c). In doing so, the learned Commissioner (Appeals)-V, Kolkata (Camp at Kanpur) has erred in law and on facts in not appreciating the fact that mere submission of the revised return cannot provide immunity from penalty proceedings and there was no bona fide inadvertence or mistake on the part of the assessee in the original return which could have been corrected by filing the revised return. (d). In doing so, the learned Commissioner (Appeals)-V, Kolkata (Camp at Kanpur) has erred in law and on facts in not appreciating the ratio of the following decisions: (i) G.C. Agarwal v. CIT ; (ii) CIT v. K. Mahim (iii) Biland Ram Hargan Dass v. CIT (iv) Kumar Jagadish Chandra Sinha v. CIT (v) Ganga Prasad v. CIT (vi) Amjad Ali Nazir Ali v. CIT (e). In doing so, the learned Commissioner (Appeals)-V, Kolkata (Camp at Kanpur) has erred in law and on facts in observing that the penalty proceedings were not initiated against the amount of ₹ 49,00,000 surrendered by the assessee in the revised return without appreciating that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t period as income of the relevant accounting period due to lack of evidence for establishing its genuineness. The revised return filed by the assessee as aforesaid was also processed on the income disclosed in the revised return. The books of accounts were produced and were put to test check. The assessee has disclosed income from manufacture and sales of moulded plastic furniture which included table, chair, drum and basin. It was further submitted that the production commenced on 30-3-2000 and as such the year under consideration, in fact, happens to be the first year of working. At the end of the discussion and while computing the income, the assessing officer further mentioned as under: Subject to the above income is computed as under: Net profit as per P L a/c filed along with revised return dated 24-12-2003 ,61,081.67 Add: Amount deposited in the bank through drafts considered as income due to lack of evidence. The same were disclosed as fresh share capital acquired in the relevant period. ,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee for the relevant assessment year can be said to be within the correct ambit and scope of Sub-section (5) of Section 139. It may be submitted that the penalty cannot be levied solely on the basis of the reasons given in the order of assessment [Hindustan Steel Ltd. v. State of Orissa and Anantharam Veerasinghaiah Co. v. CIT and CIT v. Bombay Automobiles] The mere fact that the assessee agreed to the inclusion of cash credit of other amounts in the total income on account of his inability to prove the source or to avoid protracted litigation with the department or that his representative consented to the imposition of minimum penalty before the lower authorities. (Portion in which case laws alone are discussed by the assessee are excluded). 5. The assessing officer was not satisfied and levied the penalty by holding that revised return was filed only when the assessee was prompted to do so i.e. when asked to establish genuineness of the share capital and file confirmation letters. In this regard, we refer to the observation of the assessing officer in the penalty order: 3. From the aforesaid facts, it is abundantly clear that the revised return file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2003 because assessee was not in a position to establish genuineness of fresh share capital amounting to ₹ 49,00,000 raised in the relevant period. With these contentions, assessee sought to justify the filing of revised return as also the fact that same was within the ambit of Section 139(5) of the Act. In this context, it would be appropriate to point out that the revised return filed by the assessee on 24-12-2003 was not suo motu or voluntary but on the contrary was filed when assessee was specifically required to establish the genuineness of fresh share capital/share application money shown to have been raised in the relevant period and further also when it was realized by it that the said share capital/share application money cannot be substantiated it bad no option but to file the revised return. These facts very clearly demonstrate that the revised return filed by the assessee was only after the fact that specific query was made whereby the assessee was called upon to furnish the details in respect of the share capital/share application money and further when it could not substantiate the same, it filed revised return. In view of these facts revised return filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar type of details from the appellant. Thus on going through the case record I find that before the date of revision of return filed on 24-12-2003 no query were raised about the specific share holders/share applicants. Further no enquiry was carried out about the particulars of share applicants/share holders. Meanwhile, the appellant filed its then revised return on 24-12-2003 surrendering share application money amounting to ₹ 49,00,000. Thus, there was no element of deletion of concealment by the assessing officer. Since there was no occasion to file details/confirmations, the appellant could not be held responsible for filing inaccurate particulars of income. (iii) On going through the assessment order dated 29-1-2004 passed under Section 143(3) of the Income Tax Act, I did not find any observation that the revised return was revised surrendering the share application money amounting to ₹ 49,00,000 on account of concealment detected by the assessing officer on the contrary, I found that the assessing officer has accepted the revised return as valid and processed the same and started computation including the share capital amounting ₹ 49,00,000 as shown i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order wherein assessing officer has simply made the addition of ₹ 49 lacs without framing his mind as to whether he was satisfied that the assessee has concealed the income or filed inaccurate particulars of income. 10. learned Departmental Representative then referred in the rejoinder about the decision of Hon'ble Supreme Court in CIT v. S.V. Angidi Chettiar for the proposition that no separate note for satisfaction is necessary in the assessment order. 11. We have considered the rival submissions and perused the material available on record. We will first address to the vital question as to whether satisfaction of the assessing officer is necessary during the course of assessment proceedings and whether he was satisfied in the instant case and whether such satisfaction is reflected in the assessment order in any form whatsoever. The requirements of Section 271(1)(c) are as under: (1)(c) - has concealed the particulars of his income or furnished inaccurate particulars of such income, or Explanation 1-Where in respect of any facts material to the computation of the total income of any person under this Act - (A) such person fails to offer an explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. (ii) It cannot be exercised if he is not satisfied before conclusion of the proceedings that conditions laid down in clause (a), (b) or clause (c) exist. (iii) It is the satisfaction and not the issue of penalty notice before the conclusion of proceedings that is condition precedent for exercising jurisdiction to levy penalty. (iv) There is an endorsement at the front (sic-foot) of the assessment order that action under Section 28 had been taken for concealment of income. (v) From this note the Apex Court held that assessing officer was satisfied in the course of assessment proceedings that the assessee has concealed its income. This decision was followed by Hon'ble Bombay High Court in Padgilwar Brors. v. CIT wherein it is held that what is required is the satisfaction before conclusion of the proceedings under the Act and not the issue of a notice or intimation for the exercise of the jurisdiction. A. Hon'ble Apex Court in D.M. Manasvi v. CIT reaffirmed this decision in Angidi Chettiar's case cited supra by observing as under (head notes): What is contemplated by Section 271(1) is that the Income Tax Officer should have been satisfied in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty is actually imposed on an assessee, the Income Tax Officer has to be satisfied about the conditions mentioned in clauses (a), (b) or (c)' of Section 271(1). A proceeding for imposition of penalty can be initiated by the Income Tax Officer upon a satisfaction about the said conditions and that It is true that the Income Tax Officer should be prima facie satisfied before the penalty notice is issued, but it does not mean that he is required to record such satisfaction in writing in every case. Whether the Income Tax Officer was so satisfied before he issued a penalty notice under a.-271(1) depends on the facts and circumstances of each case. In the present case, the notice was issued by the Income Tax Officer during the course of the assessment proceedings. He had all the relevant materials before him when he issued the notice. Further, in the assessment order he added a huge sum of money and also recorded that he had already issued a penalty notice. The facts stated above furnish sufficient evidence to show that the Income Tax Officer was prima facie satisfied in issuing the penalty notice . This decision of Hon'ble Calcutta High Court was followed by Hon'ble Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n has to be with respect to specific addition where several additions are made but a general issuance of penalty notice is mentioned at end of the body of order would not be sufficient, provided the assessing officer has described contumacious conduct of the assessee in respect of each addition. Also, if assessing officer has described about contumacious conduct of the assessee in respect of specific addition or additions, then it can be held that the assessing officer was satisfied before initiating the penalty in respect of that specific addition/additions. 19. Regarding the decision of Hon'ble Supreme Court in D.N. Shroffs case (supra), we notice that Tribunal, Special Bench, Delhi in the case of Sanjay Ghai v. CIT (ITA Nos. 1805 and 1806/Del/2006 pronounced on 13-7-2007), observed as under: 6. We have considered the decision in the case of Dilip N. Shroff v. Jt. CIT (supra) and are of the view that the observations of the Hon'ble Court in the aforesaid decision were in a different context. The reference to the decision in the case of Ram Commercial Enterprises (infra) had been made by the Hon'ble Supreme Court in the context of the burden of proof with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recorded in a particular manner. The court, inter alia, observed as under (head notes): In order to justify the levy of penalty, 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; the Explanation has no bearing on factor No. 1 but it 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 as with the hypothesis that it does; if an assessee gives an explanation which is unproved but not disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely related to the partners of the assessee firm; the explanation was baseless. The imposition of penalty was valid. 21. From the discussion as above we cull out following propositions ; (i) The assessing officer should be satisfied during the course of assessment proceeding that conditions precedent for assuming jurisdiction under Section 271(1)(c) exist (ii) There is no requirement in law that such satisfaction should be recorded in a particular manner or in particular words. (iii) There should be some discussion in the assessment order that assessee is guilty of contumacious conduct or addition is based on some positive material reflecting that assessee has filed inaccurate particulars of income or has concealed the particulars of income. (iv) Though a formal record of satisfaction (as held in-the decision of Hon'ble Allahabad High Court in Shyam Biri Works (P) Ltd's case (supra) which is binding on us) is not compulsory before assuming jurisdiction under Section 271(1)(c) but assessment order must show a satisfaction of the assessing officer. Though it is not necessary to use statutory words of Section 271(1)(e) but satisfaction about contumacious conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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