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TMI Blog2006 (10) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs for the assessment year 1988-89. The firm of which Madanlal is a partner is assessed as a registered firm in the name of M/s. Madanlal Gaggar. The present appeal relates to proceedings for levy of penalty on the firm M/s. Madanlal Gaggar. A search was conducted at the premises of Sh. Madanlal, between October 14, 1987 and October 17, 1987. This search was carried out under a warrant issued under section 132(1) in the name of Sh. Madanlal. Simultaneous search was conducted on the business premises of the assessee. Order in terms of section 132(5) of the Income-tax Act, 1961, were also made in the name of Sh. Madanlal only in his status as individual. In the order under section 132(5) it was noticed that no separate addition is being made in the case of the firm since the assessee has voluntarily offered in his statement recorded under section 132(5) the amount of Rs. 7 lakhs as income from undisclosed sources to be spread over in two different years i.e., the assessment years 1987-88 and 1988-89. The assessee-firm has filed a return initially for the assessment year 1987-88 on August 13, 1987, and declared total income of Rs. 47,671 and the assessment was also completed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm. Subject to verification the appeal is allowed." The Commissioner of Income-tax (Appeals) has also referred to the liability of tax under section 132(5) passed in the individual capacity. This includes the sum of Rs. 4 lakhs working of which has been given while computing tax liability for the assessment year 1987-88 at Rs. 3,67,855 which was duly deposited by the individual as stated. This amount was stated to have been paid by the assessee as per the finding recorded by the Commissioner of Income-tax (Appeals). For the assessment year 1987-88 the assessee as individual had furnished a return of his income on August 10, 1987, before search was conducted. The assessment took place on March 30, 1990. Significantly the assessment order by the Assistant Commissioner of Income-tax, Investigation Circle, recorded his finding as under: "During the course of proceedings under section 132(5) in the case of a firm the assessee vide his letter dated February 4, 1988, declared net income assessable in the assessment year 1987-88 at Rs. 4,00,000 and accordingly he filed a revised return on February 5, 1990, declaring net income at Rs. 4,15,903." In other words in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surrendered by the individual as the income of the firm. On account of this mistake the firm cannot be attributed with guilt of concealing the particulars of the firm's income which was surrendered by the assessee in individual capacity. It also noticed that the tax on the surrendered income made by Madanlal in individual capacity has also been paid by him. In view thereof, the Tribunal found that penalty could not be levied under section 271(1)(c). For the same reason, penalty levied under section 273(1)(a) for non-payment of advance tax by the Assessing Officer was cancelled. At this juncture, we found that reference to the presumption in question appears to be inapt. As the levy of penalty by the Assessing Officer and subsequent setting aside of the penalty by the Tribunal is not founded on the basis of presumption that the assessee is not guilty of concealment or furnishing the particulars of income by considering the material that was available on record and accepted the explanation furnished by the assessee in respect of addition made in the return of income for the assessment year 1987-88, therefore, nothing turns on the question of presumption only. It is well-settled a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pparently established by the order of the Commissioner of Income-tax (Appeals) read with the order passed under section 132(5) of the Act of 1961 that the assessee in the individual capacity has surrendered Rs. 7 lakhs as income from undisclosed sources spreading it out in two assessment years 1987-88 and 1988-89. The assessee's estimated liability for tax on such income was worked out in the order under section 132(5) only on that premise. The tax liability of the assessee as individual was also determined which has been paid by him. From these facts, it was apparent that the assessee as individual had surrendered Rs. 7 lakhs before the Assessing Officer in proceedings under section 132 and he has also paid tax thereon. Very significantly while assessing the assessee as individual the Assessing Officer noticed and accepted that surrender of Rs. 4 lakhs during search was in the case of a firm. This finding is apparently incongruous and contrary to the record of the proceedings under section 132(5) which was placed before us during the hearing and also contrary to the findings recorded by the Commissioner of Income-tax (Appeals) in the appeal of the firm against the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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