Case Law Details

Case Name : ITO Vs M/s Indian & Overseas Trading Co. (ITAT Lucknow)
Appeal Number : ITA No.195/LKW/2011
Date of Judgement/Order : 25/08/2014
Related Assessment Year : 2006-07
Courts : All ITAT (7314) ITAT Lucknow (92)

The facts in brief borne out from the record are that the assessee is a partnership firm engaged in the business of manufacturing and trading of bristles and brushes. Return of income was filed on 31.10.2006 showing Nil income and the same was processed under section 143(1) of the Act. A survey was conducted on 23.10.2007 at the premises of the assessee where from books of account and loose papers were impounded. During the course of survey, it was found that assessee has a large list of creditors, from whom purchase of raw bristles were made. During the course of survey, statement of Shri. Pawan Sood, partner of the assessee­ firm was recorded wherein he surrendered certain amounts which included the amounts standing as credits in three sundry creditors. Thereafter assessee filed a revised return on 19.12.2007 including the amount of Rs.45,75,945/- surrendered in respect of sundry creditors as part of total income and paid tax thereon. Thereafter assessment was completed under section 143(3) of the Act. The Assessing Officer initiated penalty on the surrendered amount in respect of sundry creditors. In response to show cause, it was contended before the Assessing Officer that the assessee has made a voluntary surrender during the course of survey proceedings in order to buy peace and filed the return accordingly and paid tax. Therefore, there is no positive detection by the Department either before or at the time of surrender or subsequently. Therefore, penalty under section 271(1)(c) of the Act should not be levied on the surrendered amount. The Assessing Officer was not convinced with the explanations of the assessee and he levied the penalty having observed that the assessee has filed appeal against the additions made by the Assessing Officer in the assessment proceedings, therefore, it punctured the theory of agreed surrender.

Held by ITAT- It is evident from the record that surrender was made during the course of survey by the assessee and furnished the return of income declaring additional income and paid the tax thereon. Nothing has been brought out on record by the Assessing Officer that the surrender was made when the assessee was cornered by the Assessing Officer. Though the Assessing Officer has mentioned in the order that the additions, on which penalty was levied, were challenged before the ld. CIT(A), but the facts are otherwise. The assessee has made voluntary surrender on account of sundry creditors and returned the additional income in the return of income filed and paid tax thereon. We have also carefully examined the judgment referred to by the parties and we find that it is a case of voluntary surrender by the assessee during the course of survey. Therefore, penalty under section 271(1)(c) of the Act cannot be levied. We have carefully perused the order of the ld. CIT(A) and we find that the ld. CIT(A) has adjudicated the issue judiciously in the light of various judicial pronouncements referred to before him. Since no infirmity has been pointed out in the order of the ld. CIT(A), we confirm the same.

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