• Feb
  • 07
  • 2013

Surrender of income to buy peace of mind is plausible explanation to avoid penalty for concealment

HIGH COURT OF ALLAHABAD

Bajrang Glass Emporium

Versus

Commissioner of Income-tax, Agra

IT APPEAL NO. 5 OF 1999

JANUARY 9, 2013

JUDGMENT

1. The present appeal has been filed under Section 260-A of the Income-tax Act, 1961, hereinafter referred to as “the Act” against the order dated 17th November, 1998 passed by the Income Tax Appellate Tribunal, Agra Bench, Camp at Delhi. The appeal has been admitted vide order dated 30th August, 2000 on the following substantial question of law.

“Whether on the facts and in the circumstances of the case, the Tribunal is legally justified in sustaining the penalty U/s 271(1)(c)?”

2. Briefly stated the facts giving rise to the present appeal are as follows:

The appeal relates to the Assessment Year 1989-90 in respect of the penalty imposed under Section 271(1)(c) of the Act. The appellant is a registered partnership firm. For the Assessment Year 1989-90 it had filed its return of income declaring income of Rs. 69,170/-. Regular assessment proceedings under Section 143(3) of the Act was initiated and in response to the same a notice under Section 143(2) of the Act was issued. The assessee along with its counsel participated and furnished the requisition information. An extra liability of Rs. 2,26,079.65 in respect of certain sundry creditors was found by the Assessing Officer and the appellant was required to explain the difference. In the reply filed by the appellant it was stated that the balance as per account books are correct and balance shown by the party not correct. However, with a view to end the prolonging the assessment proceedings and to buy peace the appellant has agreed for addition of Rs. 2,26,079.65. The amount so surrendered was added towards income by the Assessing Officer. The penalty proceedings under Section 271(1)(c) of the Act was initiated. The appellant submitted its reply. However, the Assessing Officer imposed a sum of Rs.1,25,000/- as penalty after holding that the explanation offered by the appellant could not be substantiated and was not bona fide.

3. Feeling aggrieved the appellant preferred an appeal before the Commissioner of Income Tax (Appeals), Agra, who vide order dated 30.12.1991 partly allowed the appeal and reduced the amount of penalty to the minimum leviable. Feeling aggrieved the appellant preferred a further appeal before the Tribunal. The Tribunal vide impugned order has dismissed the appeal.

4. We have heard the learned counsel for the parties.

5. Learned counsel for the appellant submitted that in the facts and circumstances of the case no penalty was leviable as the appellant itself had surrendered the said amount representing the difference in the sundry creditors in order to buy peace. He, thus, submitted that there was no concealment of income so as to warrant levy of penalty under Section 271(1)(c) of the Act. He placed reliance upon a decision of this Court in the case of CIT v. Saran Khandsari Sugar Works [2000] 246 ITR 216. The learned Standing Counsel appearing for the Department, however, submitted that when the appellant was asked to explain the difference in the appellant’s papers in respect of the sundry creditors’ account in respect of unexplained difference he simply stated that the amount shown was not correct but in order to buy peace it has surrendered the amount for adding in the income which shows that there was no plausible explanation available to the appellant. According to him, the Tribunal had rightly upheld the levying of penalty.

6. We have given our thoughtful consideration to the various plea raised by the learned counsel for the parties. From the order of the Tribunal as also of the authorities below we find that the Tribunal has held that except reiterating its stand that the balances shown in its books of account are correct no material was placed in support of the assertion. Thus, the explanation as given has not been substantiated. Even before the Tribunal no supportive evidence was furnished in support of the correctness of the balances as shown in the books of account. The Tribunal has further found that after detection has been made by the Department the surrender made by the assessee does not absolve him from the charge for which he has to be proceeded against under the provisions of Section 271(1)(c) of the Act. It has further held that the confirmation of third parties in regard to the balances appearing in books of account which differ from the ones recorded in the books of the assessee is an evidence against the assessee, which he must rebut with the material available with him and not only no efforts were made to do so the assessee kept on seeking adjournments till he was cornered by the third parties to prove inaccurate particulars of income shown by him. The Tribunal has held that from mere surrender would not absolve him from the charge against as levied. In our considered opinion, the aforesaid finding recorded by the Tribunal clearly shows that at no point of time the assessee offered any explanation regarding the correctness of the balances shown in the sundry creditors’ account and only when he was cornered and he had surrendered the amount. The decision of this Court in the case of Saran Khandsari Sugar Works (supra) would not be applicable for the reason that in the aforesaid case the Tribunal has held that the assessee had agreed to a higher assessment on the condition that no penalty would be imposed which was a finding of fact and further the Tribunal has held that no actual concealment was established and, therefore, the assessee was to be held to be discharged the onus under the Explanation to Section 271(1)(c) of the Act. On the contrary in the present case the Tribunal has recorded findings which are against the appellant.

7. In our considered opinion, the order passed by the Tribunal, therefore, does not suffer from any legal infirmity. The appeal fails and is dismissed.


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