Case Law Details
If assessee surrenders an amount with a condition that no penal action shall be taken, to avoid further litigation and to buy peace, no penalty u/s. 271(1)(c) can be imposed
IN THE ITAT DELHI BENCH ‘I’
Income-tax Officer
v.
Rakesh Kumar Gupta
IT APPEAL NO. 2690 (DELHI) OF 2009
[ASSESSMENT YEAR 2005-06]
FEBRUARY 24, 2012
ORDER
U.B.S. Bedi, Judicial Member – This appeal of the department is directed against the order passed by the CIT(A)-Meerut, dated 24.03.2009 relevant to assessment year 2005-06 whereby deletion of addition of penalty of Rs. 5,08,557/- imposed u/s 271(1)(c) of the I.T. Act, 1961 has been challenged.
2. The facts of the case indicate that during the assessment proceedings, the assessee surrendered an amount of Rs. 16,95,190/- under the head “sundry creditors” being difference in the sundry creditors’ list submitted by the assessee and that received from sundry creditors. This amount was surrendered to avoid further litigation though the payment was not made to the parties. The Assessing Officer imposed penalty on the concealment of income amounting to Rs. 5,08,557/- by observing that surrender was after issue of a notice u/s 133(6) of the Act.
3. Action of the Assessing Officer was challenged in appeal before first appellate authority and it was contended that surrender was made prior to detection by the Assessing Officer. It was voluntarily and moreover Assessing Officer did not have any incriminatory material in his possession before surrender of income and to support the contention, Ld. AR of the assessee relied upon on the following decisions:
Variety Cloth Centre v. ITO [1996] 59 ITD 377 (Pune),
ITO v. Patil Automobiles [2004] 91 ITD 1 (Pune) (TM)
Dy. CIT v. Rajan H. Shinde [2005] 93 ITD 1/143 Taxman 36 (Mag.) (Pune) (TM)
Kumar Agencies (India) v. Asstt. CIT [2003] 87 ITD 69 (Mum.) (TM)
Dr. Mrs. Sudha Kankariya v. CIT [2004] 270 ITR 296/136 Taxman 686 (Bom.)
CIT v. Saran Khandsari Sugar Works [2000] 246 ITR 216/[2002] 120 Taxman 319 All.)
Mrs. Usha A. Kalwani v. S.N. Soni [2005] 272 ITR 67/[2004] 136 Taxman 708 (Bom.)
CIT v. Kohinoor Impex (P) Ltd. [2004] 270 ITR 381/141 Taxman 304 (Delhi)
K.C. Builders v. Asstt. CIT [2004] 265 ITR 562/135 Taxman 461 (SC)
CIT v. Smt. Shashi Aggarwal [2005] 272 ITR 36/143 Taxman 199 (All.)
Bharat Rice Mill v. CIT [2005] 278 ITR 599/148 Taxman 145 (All.)
Cheap Cycle Stores v. CIT [2006] 281 ITR 166/154 taxman 284 (All.)
CWT v. Someshwar Saran Kothiwal [2006] 285 ITR 185/[2007] 160 Taxman 132 (All.)
CIT v. M.M. Gujamgadi [2007] 290 ITR 168/162 Taxman 211 (Kar.)
Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 (SC)
V.V. Projects & Investments (P.) Ltd. v. Dy. CIT [2008] 300 ITR 40/171 Taxman 62 (AP)
Star International (P.) Ltd. v. Asstt. CIT [2009] 308 ITR (AT) 33 116 ITD 408/[2008] 23 SOT 88 (Luck)
4. Before CIT(A), it was further submitted that assessee gave a bona fide explanation and undeservedly gave all the documents and information without holding any information relating to the computation of assessee’s total income, the assessee explanation unless found to be false, would deserve acceptance for purpose of penalty imposable u/s 271(1)(c) of the Act, so no penalty should be exigible. In other words, if any assessee offers an explanation, which is not found to be false, he can save himself of penalty, even if he were not able to substantiate his case as long as he places all the relevant material to the computation of his total income irrespective of fact that same explanation was not accepted for the purpose of assessment. The assessee relied upon further decisions:
1. Asstt. CIT v. Mangarman Chaudhary (HUF) [2009] 308 I.T.R. (AT) 83/[2010] 123 ITD 359 (Hyd.)
2. Asstt. CIT v. Malhotra Mukesh Satpal [2008] 115 ITD 467 (Pune)
3. Dilip N. Shroff (supra)
4. A.V.R. Prasad v ITO [2005] 97 ITD 325 (Hyd.)
5. CIT(A) while considering, accepting the plea of the assessee and relying upon few decisions has concluded to delete the impugned penalty as per para.4 of his order, which is reproduced as under:
“I have gone through the facts of the case and submissions of the appellant. There is force in the submissions of the appellant in which inter-alia, the judgments of jurisdictional High Court and Hon’ble Supreme Court have been rightly quoted. As submitted by the appellant in the following cases of jurisdictional courts, it has been held that when there is conditional surrender (as to that no penalty u/s 271(1)(c) will be imposed) no penalty u/s 271(1)(c) be levied.”
(i) CIT v. Suresh Chandra Mittal [2001] 251 I.T.R.9
(ii) CIT v. Saran Khandsari Sugar Works (supra)
(iii) CIT v. Mansa Ram & Sons [1977] 106 I.T.R.307(All.)
6. Aggrieved by this order of CIT(A), department has come up in appeal and while relying upon the basis and reasoning given by the Assessing Officer, it was pleaded for setting aside the order of CIT(A) and restoring that of the Assessing Officer. It was further submitted that only on having scrutinized the assessment of the assessee, when assessee was unable to substantiate its claim of sundry creditors, he came forward to surrender the amount. So, it was not his voluntary action. Therefore, penalty was attracted which has rightly been imposed by the Assessing Officer. Reliance was placed on Ahmedabad Bench decision as reported in Kailashbhai Ambalal Shah v. ITO [2011] 129 ITD 135/9 taxmann.com 9 (Ahd.), CIT v. Producin (P.) Ltd., [2010] 191 Taxman 79 (SC) and it was prayed for reversal of the order of the CIT(A).
7. Ld. Counsel for the assessee relied upon the order of CIT(A) and pleaded for its confirmation. He has placed reliance on the case laws as cited before CIT(A) and incorporated in the first appellate order and also further case laws as reported in Saran Khandsari (supra), Mansa Ram & Sons (supra) and CIT v. Careers Education & Infotech (P.) Ltd. [2011] 336 I.T.R. 257 (Punj. & Har.) to plead for confirmation of the impugned order.
8. We have heard both the sides, considered the material on record as well as case laws cited by rival sides. From the material available on record, we find that surrender was made subject to no penalty vide letter of the assessee dated 17.2.2009 filed before the Assessing Officer during assessment proceedings, which clearly indicate that surrender was being made with a condition that no penal action will be made and to avoid further litigation and to buy peace and jurisdictional High Court decisions in the case of Saran Khandsari (supra) and Mansa Ram & Sons (supra) are in favour of the assessee, in which it is held as under:
“The penalty in question was deleted by the AAC. The Tribunal dismissed the Revenue’s appeal by observing as under :
“2. The AAC deleted the penalty for the following reasons :
“As held by the Allahabad High Court in the case of CIT v. Mansa Ram & Sons [1975] CTR (All) 163 : [1977] 106 ITR 307 (All) TC 50R.625, a conditional surrender of cash credits or agreement to certain assessment does not attract penalty proceedings. On the facts and in the circumstances of the present case, it appears to be obvious that the income assessed by the ITO was agreed to by the appellant as a measure of co-operation and with a view to escaping penal consequences, I find from the assessment order that no basis is given for estimating the income at Rs. 35,000. It, therefore, appears that the agreement was conditional. In such circumstances, penalty cannot be imposed. From another angle also, the fact as noticed in the assessment order do not indicate any concealment at all. The income was merely estimated without finding any concealment as such. From this angle also. Therefore, penalty is not attracted. The penalty order is, therefore, cancelled. The Revenue is in appeal. Sri B.D. Sainia, appearing for the Revenue, supported the order of the ITO. For the assessee reliance was placed on the AAC’s order. After hearing the parties, we find ourselves in agreement with the reasoning and conclusion of the AAC on the facts of the case we decline to interfere.” We have heard Sri A.N. Mahajan, learned counsel for the CIT. No one has appeared for the respondent. The finding that the assessee had agreed to a higher assessment on the condition that no penalty would be imposed, is a finding of fact. Similarly, the finding that no actual concealment was estimated is also a finding of fact and, therefore, the assessee would be held to have discharged the onus under the Explanation to s. 271(1)(c) of the Act.
We, therefore, answer all the questions in the affirmative, i.e., in favour of the assessee and against the Revenue.”
and CIT(A) has followed these decisions while deleting the impugned penalty. Moreover, department has not been able to bring on record any contrary superior courts decisions in this regard. Therefore, we do not find any valid ground to interfere in the order passed by the CIT(A), which is upheld and appeal of the department is dismissed being de void of any merit.
9. As a result, the appeal of the department is dismissed.
