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TMI Blog1991 (12) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... tist. She had offered an amount of Rs. 25,00,000 for taxation under the Voluntary Disclosure Scheme in 1971. Thereafter, on 13-10-1980, she made an application to the Commissioner of Income-tax, Central Range-II, Bombay, for settling the dispute about the admissibility of expenses in her assessments relating to the assessment years 1970-71 to 1978-79. A copy of this application dated 13th October 1980 is filed at pgs. 23 to 26 of the compilation (Vol. I). Apparently, she had also independently filed a petition under section 264 of the Act to the CIT, Central Range-II, Bombay, and an order on this revision petition was passed by the CIT on 18-6-1981. A copy of this order has been filed at pgs. 27 to 31 of the compilation. It is interesting to note that whereas the CIT passed an order on the revised petition under section 264 of the Act, the order passed by the CIT on the assessee's application dated 13-10-1980 is not placed on record, on the ground that such order has not been made available to the assessee. In the course of hearing before us, we specifically called upon the Departmental Representative to find out from the office of the CIT concerned and furnish a copy of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. The same was, therefore, treated as income by the ITO. The ITO made various disallowances from expenses claimed by the assessee and worked out professional income at Rs. 17,18,333. Addition on account of disallowance of expenses and addition on account of unexplained bank deposit made by the ITO worked out to Rs. 3,31,666. The assessee has come up with application under section 264 against disallowance of expenses made by the ITO. The assessee has also come forward for settlement of income for this year also. According to the terms of settlement, additional income of Rs. 4,20,168 is to be added to the net income shown by the assessee for this year. Additional income as a result of settlement is higher than the disallowance made by the ITO. The case, therefore, does not call for reduction in expenses disallowed by the ITO. The application is rejected. " Since, according to the terms of settlement Rs. 4,20,168 was agreed to be added to the net income, the CIT did not give any relief for the same. It is in consequence of the above observation of the CIT that the assessment for the assessment year 1977-78 was reopened. Having stated these facts, Sri Harish argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealment. They were made because the Department took the stand that such expenses could not be treated as expenses incurred for the purpose of business. Further, the assessee in order to settle her outstanding income-tax matters had made a petition to the Department under section 273A(4) on 18-3-1983 and as a consequence of the terms agreed upon while making the order on such settlement petition, the assessee had agreed to the disallowances as per the details given on pg. 1. Sri Harish stated that in the petition dated 13-10-1980 for settlement of assessments for the years 1970-71 to 1980-81, the petitioner stated that she was not sure if she was in possession of all material papers and documents. Most of the documents such as bank statements, vouchers, contracts, receipted challans, annuity policies, municipal assessment papers were either retained by the consultants or claimed to have been displaced. She pointed out that under the Voluntary Disclosure Scheme made by her in 1975 in which she had disclosed a sum of Rs. 25 lakhs, the entire backlog of income had been fully brought to tax. The assessee's father who was attending to all her tax matter had a massive heart attack to whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arish pointed out that penalties levied under the Wealth-tax Act were deleted by the Tribunal for the assessment years 1979-80 and 1980-81 in their order in WTA 326 327/Bom/88 (pp. 78 to 88 of the compilation). Sri Harish relied on para 7 of this order in which the Tribunal inter alia observed as follows : " 7. . . . . A cursory scrutiny of the expenses so claimed would show that these expenses were incurred on postage telegrams, salaries allowances, car expenses, dress making charges, office expenses, dance training etc. and mostly the expenses were disallowed on the ground that they were personal expenses. There is no finding that any portion of the expenses was incurred for acquisition of an asset. The addition on account of the disallowed portion of the expenses made to the total income of the assessee by way of settlement did not ipso facto mean that the assessee had deliberately failed to show the value of any assets acquired. It is further seen that for the assessment year 1977-78, when an addition of Rs. 10,06,161 was made in the computation of net wealth by treating the disallowed expenses as the assessee's net wealth, no penalty proceedings were started by the WTO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(c) are attracted. He relied on a decision of the Madras High Court in CIT v. Krishna Co. [1979] 120 ITR 144 to argue that even if an assessment is made on an agreed accrued basis, that fact by itself does not absolve the assessee of the charge of concealment. For the same proposition, he relied on the decision of the Bombay High Court in CIT v. Daimler Benz A. G. [1977] 108 ITR 961 (FB). He also cited a decision of the Bombay High Court in Western Automobiles (India) v. CIT [1978] 112 ITR 1048 and the decision of the Calcutta High Court in CIT v. P. B. Shah Co. (P.) Ltd. [1978] 113 ITR 587. In reply, Sri Harish pointed out that the account clerks had to be engaged to maintain cash books and ledger. Out of all the 5 servants engaged by the assessee, whose salaries were possibly disallowed as personal expenses, several of such servants were required to assist the assessee in her dance tours, preparation of her costumes dresses etc., required for such tours. 5. We have carefully considered the submissions made on either side and we have gone through the case-law sighted. In our opinion, on the facts stated before us, penalties for concealment of varying amounts for the 4 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner concerned had also given any directions about exempting the assessee from penalty for alleged concealment. Since for the assessment year 1977-78, the figure of disallowance of expenses was determined at Rs. 4,20,168, the Commissioner did not give any relief for that year but the assessment for that year was reopened on the basis of what the Commissioner has stated in his order under section 264, the relevant part of which (para-10) has been reproduced hereinabove. Disallowance made on similar basis for the assessment year 1976-77 has not invited any penalty for concealment. While furnishing the details of penalties levied (vide para-2 of the compilation) the assessee has pointed out that for the assessment year 1977-78, apart from making disallowance of Rs. 4,20,168 as per the settlement of income on the petition dated 13-10-1980 to which the Commissioner has made reference in his order under section 264, there were further disallowances of Rs. 19,570 and addition for Rs. 50,000 as deposits in bank considered as professional income. The penalties levied by the ITO were reduced by the CIT(A) for the assessment year 1977-78 from Rs. 3,40,000 to Rs. 3,23,100, for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can hardly be said that such additions represent concealed income of the assessee. 6. No doubt, penalty under section 271(1)(c) levied for the assessment year 1975-76 has been confirmed by the A-Bench of the Tribunal in ITA No. 2979/Bom/86 dated 5th July, 1990 (pp. 89-90 of the compilation) but the facts for that year were different and Sri Harish pointed out that a miscellaneous application has been filed against that order. However, the decision of the Tribunal in W.T. appeals in the assessee's case for the assessment years 1979-80 and 1980-81 is more relevant to the facts of the present case. This decision relates to penalties levied on the assessee in the same or similar circumstances. 7. The decisions cited on behalf of the assessee support the finding given by us. In the Supreme Court decision in Sir Shadilal Sugar General Mills Ltd.'s case, Their Lordships laid down the principles that from the assessee agreeing to additions to his income, it does not follow that the amount agreed to be added was concealed income. There may be a hundred and one reasons for such admission, i.e., when the assessee realises the true position, it does not dispute certain disallowances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of peak credits but this was done after the department had scrutinised the books of account of the assessee and what was added was admittedly an item of income nature. In the present case, the addition is of disallowable expenses made as a matter of settlement and not as a result of any investigation. The genuineness of expenses so claimed has not been challenged. They have been disallowed on the ground that some of the expenses are not allowable under the provisions of the Income-tax Act. That fact by itself does not attract the provisions of penalty. The decisions of the Bombay High Court in Western Automobiles (India)'s case and of the Calcutta High Court in P. B. Shah Co. (P.) Ltd.'s case concerned penalty levied on an addition of cash credits, where again the facts are distinguishable for the reasons as were stated above. We are, therefore, of the view that on the facts and circumstances of the case and having regard to the principles laid down by the Supreme Court and other High Courts, to which detailed reference has been made, the penalties levied in the present case for all the four years cannot be sustained and have to be deleted. 9. We will now deal with the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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