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TMI Blog2022 (10) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... andoi in ITA no. 319/JPR/2022 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are exactly identical except the difference in the amount of levy of penalty in other assessment year. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 319/JPR/2022 is taken as a lead case. 4. Based on the above arguments we have also seen that for all three appeals grounds are similar, facts are similar and arguments were similar and therefore, were heard together and are disposed by taking lead case facts, grounds and arguments from the folder in ITA No. 319/JPR/2022. 5. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 319/JPR/2022 before us on the following grounds; "1. In the facts and circumstances of the case the learned CIT(A) has erred in confirming the action of the learned AO in imposing the penalty u/s 271(1)(c) of the Income Tax Act, 1961. 2. In the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication before the Hon'ble Income Tax Settlement Commission, New Delhi [ here in after referred as ITSC ] on 04.03.2015. Various reports including Rule-9 report, reply to Counter Comments under rule 9A and Verification Report were also filed before the Hon'ble ITSC from time to time during the pendency of settlement proceedings, The Hon'ble ITSC, New Delhi passed order u/s 245D(4) of the IT Act rejecting the assessee's application vide S.A. No. RJ/JP-51/2014-15/40-IT on 19.09.2016 stating that "Considering the facts of the case the issues emanating therefrom as discussed in the foregoing pages, and judicial opinion as narrated in the earlier para, we are of the considered opinion that the appellants have failed to make neither a fair and true disclosure, nor given any sound basis for explaining the manner of earning such undisclosed income and working out such income. Hence, the mandatary conditions of section 245C remain unfulfilled. As such, the Commissioner if unable to provide for the terms of settlement as required u/s. 245D(6). Accordingly, the application in both cases, are hereby rejected." As a result, the proceedings were abated to the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed submissions made by the Ld. AR including the judgements cited in this regard. The fact remains that during the course of search, the appellant has disclosed Rs. 12.41 Lakh on account of entries made in Annexure A-1, Page 1 & 2 found from his residence, being undisclosed. loans and advances and the same was confirmed by him in his statement recorded u/s 13214) of the Act. The AO observed that the appellant has failed to point out the duplication of the amount of Rs. 12.41 Lakhs determined from the seized documents at Annexure A-1, Page 1 & 2 with the pocket diaries at AS Exhibit-4, 5 & 6 as contended by the appellant. Further it was observed that such duplication was neither pointed out during the search proceedings and in the statement recorded u/s 132(4) and also in the Affidavit dt. 30.07.2012. The AO further observed that both Annexure A-1 & Annexure AS separate and unrelated documents which have been separately seized and therefore there was no correlation between the two and the appellant himself failed to point out the alleged correlation. Further during the assessment proceedings, the appellant filed an affidavit dt. 13.09.2017 wherein he requested that the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le ITAT vide their order in ITA No. 1309/JP/2018 dated 07.09.2020 has also confirmed the aforesaid addition in the current year but has given the set off of this addition in Assessment Year 2011-12 by holding that this amount was available with the appellant for making advance in subsequent years. These findings are given in para 67 on page no. 75 of the order of the Hon'ble ITAT wherein the Hon'ble ITAT has allowed the set off in assessment year 2011-12. Thus, the fact remains that an addition of Rs.6,00,000/- was made by the AO on account of undisclosed advances which has been confirmed by the Ld. CIT(A). This addition has been further confirmed by the Hon'ble ITAT which implies that the appellant failed to explain the snare of undisclosed advances of Rs. 6,00,000/- Thus the case of the appellant is squarely covered under the provisions of sec. 27(1)(c) of the Act. (iv) It is in this background when the appellant himself admitted the undisclosed. income, that this amount was added by the AO in the quantum proceedings as undisclosed advanceswhich was confirmed by the Ld. CITIA) and subsequently by the Han ble ITAT, Jaipur Bench, Jaipur, that the penalty u/s 271(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure does not free the assessee from the mischief of penal proceedings under section 27111c). The law does not provide that when an assessee makes a voluntary disclosure of his concealed Income, he has to be absolved from penalty: 6) The surrender of income in this case was not voluntary in the sense that the offer of surrender was made in view of detection made by the Assessing Officer in the search conducted in the sister concern of the assessee; 7) The Assessing Officer had to satisfy whether the penalty proceedings were initiate or not during the course of the assessment proceedings and the Assessing Officer tous not required to record his satisfaction in a particular manner or reduce it into writing. Thus, there was no illegality in action of department in initiating penalty proceedings. Accordingly, the contentions of voluntary surrender to buy peace and avoid litigation etc cannot be considered as defence for non-levy of penalty under section 271(1)(c) of the Act. (viii) In the above case, the Hon'ble Supreme Court held that AC shall not be carried away by plea of assessee like voluntary disclosure, buy peace, avoid litigation, etc. to explain its conduct. Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and discussion here in above, the contentions and submissions of the appellant are not found to be acceptable and therefore they are rejected and the penalty of Rs. 1,85,400/- imposed by the AO u/s 271(1((c) is confirmed. Accordingly, the Ground of Appeal No. 4 is treated as dismissed. 11. As the assessee not finding favour with the order of the ld. CIT(A), has filed an appeal before this tribunal. In this appellant proceeding the ld. AR of the assessee submitted following written submission to support the various grounds raised before us. The written submission filed by the assessee is reiterated here in below: Ground No. 1 to 4:- 1. In the facts and circumstances of the case the learned CIT(A) has erred in confirming the action of the Learned AO in imposing the penalty u/s 271(1)(c) of the Income Tax Act, 1961. 2. In the facts and circumstances of the case the learned CIT(A) has erred in confirming the action of the Learned AO in passing the order under section 271(1)(c) of the Income Tax Act, 1961 without striking off the irrelevant portion of the printed show cause notice dated 15.09.2017 viz., furnished inaccurate particulars of income or concealed particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer and for that matter the assessee cannot change the position of law by mutually agreeing on some issues. It is settled position of law that what is otherwise not taxable cannot become taxable because of the admission of the assessee nor can there be any waiver of the right otherwise admissible to the assessee in law. The chargeability of income is not dependent on the admission of or waiver by the assessee. Chargeability is dependent on the charging section of the Income Tax Act which needs to the strictly construed and followed. CIT vs. Bhaskar Mittar 262 ITR 638 (Kol) The position of law being so no addition could have been made in the hands of the assessee. But since the assessee has accepted, therefore the addition was made in his hand and finally sustained. The learned AO has initiated the penalty u/s 271(1)(c) in the assessment order by mentioning that "the assessee has concealed the income". But there is no evidence or credible documents on the basis of which it can be said that the assessee has concealed the income. Here it is a question whether only by accepting something the assessee has agreed to pay tax for some other reasons. Then no liability for pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome or assets of the assessee but these are the liabilities of the assessee on which the assessee has paid taxes to over come with the technical and legal difficulties and purchase peace of mind and avoid unnecessary prolonged litigation. The counsel has been changed as the assessee did not find favour with the scheme of the counsel. The previous counsel had also wrongly pleaded before the Settlement Commission regarding the other papers that these indicated loans advanced by the assessee whereas these are the loan taken by the assessee. The position being so it is submitted that assessee may not be punished for the wrong doing of the counsel because he has already paid the taxes and penalty should not be levied in such circumstances. The observations of the Learned Assessing Officer are totally uncalled, unjust and irrelevant. The addition is totally on estimate basis and has been made in lump sum manner. The penalty has been levied only with reference to the statement of the assessee. No independent enquiries have been made while levying the penalty nor any such material has been brought on record which establishes that assessee concealed any income. The submission of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed income unless circumstantial evidence in the form of extra cash, jewellery or investment outside books is found. (iii) Ashwini Kumar vs ITO 39 ITD 183 (Del) In the case of dumb document, revenue should collect necessary evidence that the figures represent incomes earned by the assessee. (iv) JCIT vs West Bengal Trading Agency, IT(SS) NO.49(Cal) of 2001 There has to be direct or circumstantial material to establish that the intention expressed in the seized document/books has actually been implemented (vide para 8). (v) P.R.Patel v. Dy.CIT 78 ITD 51 (TBOM) No addition can be made on the basis of a seized documents which do not bear the name of assessee. 5. Finding the of learned CIT(A) - It is submitted that the learned CIT(A) has confirmed the penalty imposed by the Learned AO on the basis of that in the quantum proceedings the Hon'ble ITAT sustained the addition on account of income surrendered by the assessee during the course of search. The learned CIT(A) has also mentioned on page 13 of the appellate order that the surrender of income was not voluntary and the income was offered by affidavit agreed to consider in the hands of the assessee. The Learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Explanation deeming concealment, the assessee has a duty to offer an explanation. But where an explanation was offered and found to be unreliable, penalty becomes exigible. [CIT v Mohd. Mohtram Farooqui (2003) 259 ITR 132 (Raj)]. Therefore, your honour is requested to delete the penalty imposed by the learned AO and confirmed by the Learned CIT(A). Ground No. 6 - The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing. Not pressed. Your Honor is requested to decide the appeal in favour of the assessee by considering the above submission and oblige." 12. The ld. AR also drawn our attention to the notice of penalty issued by the ld. AO where in he has not strike off the limb of section 271(1)(c) to levy the penalty and thereby the order of levying the penalty is against the principles of natural justice. However, at the time of hearing the ld. AR of the assessee has not pressed this technical ground raised ground no. 1 to 4 and he had decided to argue the appeal on merits of the case. In addition to the above written submission ld. AR appearing on behalf of the assessee submitted that the settlement applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the department has also not proved that the amount recorded in the dump document is the loan given or taken and in both the situation the other party is not referred or examined so far by the revenue and thus this unilateral transaction and that too is not related to assessee cannot be considered the concealment of income for levy of penalty. 13. The ld. DR is heard who has relied on the findings of the lower authorities and vehemently argued that the assessee has not shown the income in the return of income filed which is supported by seized document. The Hon'ble ITAT has confirmed the addition after hearing the merits of the assessee's case and thus the levy of the penalty on the sustained addition is automatic and it falls under the meaning of the concealed income and the information is unearthed during the searched proceedings and if no search is conducted this income remained undisclosed. Thus, he has supported the findings of the ld. CIT(A). The ld. DR further relied on the judgement of Sundarm Finance Limited 99 Taxmann.com 152 (SC) where in the apex court has held that even the claim of depreciation wrongly claimed is subject to levy of penalty u/s. 271(1)(c) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of this it not correct on the part of the Learned Assessing Officer to make any addition with reference to these papers and even if made the same made it is not liable for any penalty as it not undisclosed income of the assessee or concealed income of the assessee. The aforesaid facts established that these page is rough, dump and related to the assessee. Thus, based on that facts on record no addition is warranted on the basis of the said seized paper. But the assessee agreed to pay tax to avoid prolonged litigation and purchase peace of mind before the settlement commission. Therefore, on such addition penalty cannot be imposed where the transactions are not related to the assessee and there is no positive evidences that the entries recorded in seized paper is undisclosed income of the assessee. The ld. DR appearing on the behalf of the revenue did not controvert the arguments of the ld. AR of the assessee related to the fact recorded in question no. 25 of the statement record and the fact that who is Subhas ji and whether any investigation conducted to find the truth regarding the fact that the loan is given or taken but merely stated the income is confessed as his own in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise the entry is not linked with the affairs of the assessee. 18. The ld. AR Vehemently argued that the Learned Assessing Officer has not made any post search enquiries so as to link the entry with the business of the assessee. No effort was made even to examine the person who had taken the loan from the assessee nor any action considered in his hands this parties were initiated; all these suggest that the revenue is taking the benefit of the voluntary surrender made by the assessee and ld. AO acted having one sided approach. The relied upon paper has no narration so as to indicate that it pertains to the business / affairs of the assessee. Name of the assessee is not available as such it could not be considered in his hands. Signature of the assessee are not available on this page as such it does not pertain to the assessee. Based on this findings even the addition made and sustained cannot lead to levy of penalty because the papers relied upon are merely the loose paper itself has not leg to stand and it cannot be considered as undisclosed income of the assessee as the revenue did not match with the source and particular assets based upon which this can be considered as income/a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble ITAT which implies that the appellant failed to explain the snare of undisclosed advances of Rs. 6,00,000/- Thus the case of the appellant is squarely covered under the provisions of sec. 27(1)(c) of the Act." 19. Moreover, additions on account of advances to person found noted here and there on various papers deserved to be segregated and peak amount required to be added. No such exercise was done by the Learned Assessing Officer nor an opportunity was allowed to the assessee for working out the same. It is settled principle of law that in such cases where the capital revolves many times in a year in giving advances time and again additions required to be made only on capital amount and not on multifold revolving of the same. A capital may revolve four to five times in a year in giving advances and receiving then back and giving the same again and again. In such circumstances it is the one time capital that requires to be considered and not the total of all the transactions. These papers are the deaf and dumb papers and when there is undisclosed income not supported by any asset no penalty can be levied on such additions. The penalty proceeding are separate pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome unless circumstantial evidence in the form of extra cash, jewellery or investment outside books is found", in the case of Ashwini Kumar vs ITO 39 ITD 183 (Del) " In the case of dumb document, revenue should collect necessary evidence that the figures represent incomes earned by the assessee." In the case of JCIT vs West Bengal Trading Agency, IT(SS) NO.49(Cal) of 2001 "There has to be direct or circumstantial material to establish that the intention expressed in the seized document/books has actually been implemented (vide para 8), and in the case of P.R.Patel v. Dy.CIT 78 ITD 51 (TBOM) "No addition can be made on the basis of a seized documents which do not bear the name of assessee." Based on judicial precedent and the detailed discussion made here in above the penalty levied on the sustained addition of Rs. 6,00,000/- is deleted and in terms of these observations ground no. 5 raised by the assessee is allowed. 21. In the result, the appeals of the assessee in ITA No. 319/JPR/2022 is allowed. 22. The fact of the case in ITA No. 319/JPR/2022 is similar to the case in ITA No. 320 & 321/JPR/2022 and we have heard both the parties and persuaded the materials available on record ..... X X X X Extracts X X X X X X X X Extracts X X X X
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