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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 ..... re application money and the revised 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 appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant 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 Depreciation to be considered separately ,35,402 Income-tax provision ,700 Out of rent, rate and taxes as discussed ,000 Disallowance under section 40A(2)(b) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 filed by the assessee was not as a result of discovery or omission or wrong statement in the original return filed by it but it was prompted to file the revised return only where it was specifically called upon to substantiate the genuineness of fresh share capital which was shown to have been raised in the relevant period. In view of these facts, it is undisputed that mere filing of revised return cannot be taken to be sufficient ground to consider the same as having been filed within the ambit of Section 139(5) of the Act. It is also settled that the requirement for treating the revised return to be valid revised return under the provisions of Section 139(5) is that the omission or mistake in the original return must be due to bona fide inadvertence or mistake on the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 the assessee cannot be given any credence as the same was filed only after the assessee was confronted on these specific issues relating to the substantiation of genuineness in respect of the share capital/share application money including the identity of the alleged subscriber. It would also be appropriate to mention that the assessee has placed reliance on the decision of Delhi High Court delivered in the case of CIT v. Steller Investment Ltd. which was later upheld by the Hon'ble Supreme Court (in) CIT v. Steller Investment Ltd. (2000) 164 CTR (SC) 287. it was contended by the assessee that the Apex Court in its aforesaid decision has held that once it is found that the deposit of share application money in lieu of the shares having been allotted no further enquiry as to sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 in the revised return. (iv) I further find that the assessing officer has made certain additions/disallowances and simply initiated the penalty proceeding under Section 271(1)(c) without giving any indication about specific concealment. Apparently, it seems the penalty proceeding was not initiated against ₹ 49,00,000 but against the following additions and disallowances: A. Out of rent, rate and taxes as discussed ₹ 60,000 B. Disallowance under Section 40A(2)(b) of the Act ₹ 42,000 C. Out of power and fuel as discussed ₹ 50,000 D. Out of freight and cartage as discussed ₹ 15,000 In substance, I find no indication in the assessment order treating the share capital of ₹ 49,00,000 surrendered in the revised return as concealed income. However, on going thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 which is found by the assessing officer or the Commissioner (Appeals) for the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. 12. Hon'ble Supreme Court in S.V. Angidi Chettiar's case (supra) referred to by the learned Departmental Representative dealt with this issue on p. 745 of report as under: Counsel contended that in any event, penalty for the assessment year 1949-50 could not be imposed upon the assessee firm because there was no evidence that the Income Tax Officer was satisfied in the course of any assessment proceedings under the Income Tax Act that the firm ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs 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 course of assessment proceedings regarding matters mentioned in the clauses of that Sub-section. It is not essential that the notice to the person proceeded against should have also been issued during the course of the assessment proceedings. Satisfaction, in the very nature of things, precedes the issue of notice and it would not be correct to equate the satisfaction of the Income Tax Officer with the actual issue of notice. On the basis that assessing officer was satisfied during the course of assessment proceedings that there was a default under Section 22(1) of the Act and accordingly thereafter he had issued penalty notice under Section 271(1)(c). Hon'ble Gujarat High Court in CIT v. Ochhavlal Panalal Kothari held that satisfaction having been reached before the assessment order was passed, issuance of notice for penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials 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 Allahabad High Court in Shyam Biri Works (P) Ltd. v. CIT wherein it is held that "Whenever the assessing officer has to record his satisfaction under the Income Tax Act, 1961, it is specifically mentioned, e.g., in Section 148(2) of the Act which states that "the assessing officer before issuing any notice under this section will record the reason for doing so". Section 273 does not have a similar provision requiring the recording of the reason or satisfaction. Hence, it has to be inferred that Parliament never intended that before initiating penalty proceedings and issuing notice under Section 273 that the assessing officer must record his reasons in writing for doing so. Although the assessing officer must have satisfaction as required under Section 273 of the Act, it is not n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to establishing whether or not there was concealment of income by an assessee. The court has dealt with the law prior to insertion of Explanation (1) and, the law thereafter and it finally concluded that even after insertion of Explanation (1) the assessing officer has to arrive at a satisfaction that the explanation offered by the assessee was false and that the same was not bona fide and that all the facts relating to the same and material to the computation of income were not disclosed by the assessee. The court held that the assessing officer should not begin with the presumption that the assessee is guilty and that the findings in the assessment proceedings are not conclusive in this regard. The above decision of the Hon'ble Supreme Court came to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee; 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 cannot help the department because there will be no material to show that the amount in question was the income of the assessee; alternatively, treating the Explanation as dealing with both the. ingredients (i) and (ii) above, where the circumstances do not lead to the reasonable and positive inference that the assessee's explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part; even in, this view of the matter, the Explanation alone cannot justify levy of penalty and absence of proof acceptable to the department cannot be equated with fraud or wilful default. The assessing officer should be satisfied during the course of the assessment proceedings that the assessee had concealed particulars of income or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 conduct of the assessee is necessary such as he is not filing correct particulars of income or hiding some part of income followed by initiation of penalty proceedings relating to such conduct or furnishing inaccurate particulars or hiding income. If the assessment order is silent on these aspects except making addition on the basis other than contumacious conduct, filing inaccurate particulars or concealing some income, the assessing officer cannot assume jurisdiction for initiating penalty proceedings. (v) The inference whether the assessing officer was satisfied about contumacious conduct of the assessee or his not filing correct particulars or not disclosing full facts will depend upon facts of each case. 22. In the present case as observed above there is nothing in the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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