9911796707
TMI Blog1996 (11) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... own as income in the books. Rs. 1,50,000 in the form of investment in jewellery account. Rs. 1,25,000 in the form of house investment account. I am surrendering this amount of Rs. 9,25,000 in the form of undisclosed and unaccounted income of investment and am willing to pay tax thereon voluntarily. I am making this surrender with the understanding that I would get absolved of the liability to pay interest, penalty and prosecution in respect of this income. 4. Reference may thereafter be made to the order rendered by the learned IAC (Assessment), Range-I, Kanpur, under sub-section (5) of section 132 of the Act, copy available at pages 4 to 14 of the paper-book which in its body at para 8 specifically accepts the good faith of the assessee in the following manner : " 8. At the time of search, the assessee has made a disclosure of his income, hitherto undisclosed, in good faith in order to get immunity from penalty. The statement of the assessee Shri Gyan Chand Bhatia recorded under section 132(4) on 11-8-1987, disclosed the following income : (i) In respect of F.D. Rs, Indira Vikas Patra Value w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reminded the Ld. D.C. (Assessment), about the " surrender covering all matters in agreement of the then Assessing Officer and final settlement of search proceedings ", which facts were reiterated in another communication dated 14-3-1991, addressed to the Dy. Commissioner of Income-tax, Special Range-I, copy available at pages 21 to 26 of the paper-book. Eventually, the assessment was completed on the 18-3-1991, wherein the surrender amount was included in the following manner : " The assessee, therefore, vide order-sheet entry dated 5-2-1991 was required to explain why the entire amount offered as additional income i.e., Rs. 9,25,000 should not be added in assessment year 1988-89. The assessee filed its reply dated 14-3-1991 wherein the assessee has claimed bifurcation of the amount of Rs. 9,25,000 either in assessment years 1985-86 and 1986-87 or in assessment year 1988-89 during which disclosure was actually made and requested that no penal action be taken. Since the disclosure dated, i e., 11-8-1987 falls relevant to assessment year 1988-89 entire offered amount of Rs. 9,25,000 is, therefore, added in the income for assessment year 1988-89. " 6. The matter rested there as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, it was pleaded that the commitment should have been honoured by the department particularly in view of the fact that the appellant had surrendered the amount to buy mental peace and to avoid unnecessary litigation. Attention was also drawn to the finding of the Assessing Officer that Explanation 5 of section 271 was not applicable to the entire disclosure as only the assets amounting to Rs. 4,31,000 could be relatable to assets found during the course of search. It was pointed out that the word ' things ' was used in the Explanation and that this word could not only cover money, bullion, jewellery but all other assets. I am in agreement with the first argument of the appellant that the taxes were paid in relation to disclosure of Rs. 9,25,000. The assets seized and retained under section 132(5) of the IT Act, 1961 were sufficient to meet the tax demanded. The second ground of the appellant however defies acceptance in the light of the fact that a disclosure was made on 11-8-1987. This disclosure was not reflected in the return of income filed on 4-8-1989. In this ground it must be mentioned that disclosure was not reflected in any return filed by appellant subsequent to the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed during first appeal) and none else. That the Assessing Officer as was clearly demonstrable had imposed penalty on the ground that taxes had not been paid by the assessee. That this finding of the Assessing Officer became otiose as the same was reversed by the learned CIT (Appeals), who in unambiguous terms accepted the assessee's stand that taxes in relation to the disclosure of Rs. 9,25,000 had been paid by the assessee [refer to the extracted portion of the CIT (Appeals) order]. The second limb of the assessee's submission before us has been that even if he did not succeed on the first preliminary objection about the disappearance of the basis on which the penalty has been imposed, the reason assigned by the learned CIT (Appeals) also did not had any legal legs to stand. Elaborating, it was contended that the income, i.e., the amount of Rs. 9,25,000 stood fully disclosed from various documents starting from the assessee's statement under section 132(4) and his two petitions dated 12-2-1991 and 14-3-1991 referred to supra. A reference of another petition dated 15-4-1991, copy available at page 27, which was addressed to the learned Dy. Commissioner of Income-tax, Range-I, Kanpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first appellate authority became final, the same not having been challenged by the department either in a cross-appeal or cross-objection. Therefore, without going into the merits of the aspect of the matter, we stop at that. Thus, there is sufficient force in the stand taken by the assessee that the learned CIT (Appeals) sustained the penalty only after changing the basis on which the penalty was imposed by the Assessing Officer and by carving out a new ground. In this connection, reference may be made firstly to the provision of clause (b) of sub-section (1) of section 251 as per which during first appeal against an order imposing a penalty the appellate authority may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. It is also important to point out that this power compared to the other powers conferred on a first appellate authority as enumerated in clauses (a) and (c) of the same provision in respect of an appeal against the order of assessment or in residual matters is not as wide as in the remaining two clauses and is restricted to either confirm or cancel a penalty order or vary it so as either to enhance or reduce the penalty. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 5 hereinbefore. Similarly, in the computation part of the assessment at Item No. 3 the assessment order finds the following recording :--- " 3. Amount of disclosure made on 11-8-1987 in terms of section 132(4) as discussed above. Rs. 9,25,000 Gross total income Rs. 5,92,336 17. Thus, there does not remain any doubt in the assessee's plea that right from the very beginning till the end he made disclosure of Rs. 9,25,000. It is, therefore, not possible for us to legally agree with the Ld. CIT (Appeals) that " in effect the appellant by filing such return of income has retracted from the disclosure at the time of search ". The document referred to supra, and the assessment eventually made totally belie the view taken by the Ld. CIT (Appeals). In fact, the background of the addition of Rs. 9,25,000 as is demonstrated above is nothing else than the categorical disclosure and that too persistently made by the assessee before the revenue authorities. In this connection, however, reference may be made to a decision of the Jurisdictional High Court in the case of Mohd Ibrahim Azimulla v.CIT [1981] 131 ITR 680 (All.), which also helps the assessee inasmuch as even if it could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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