Income Tax Appellate Tribunal - Lucknow
Smt. Brij Bala Chaudhary vs Income Tax Officer on 30 December, 2002
Equivalent citations: [2003]87ITD173(LUCK), (2004)82TTJ(LUCK)355
ORDER
P.N. Parashar, J.M.
1. In this appeal against the order of CIT(A), Kanpur, dt. 1st May, 1995, for the asst. yr. 1990-91.
2. The assessee has objected to the sustenance of penalty of Rs. 15,000 imposed by the AO under Section 271(1)(c) of the IT Act, 1961.
3. The assessee has taken as many as seven grounds to challenge the sustenance of imposition of penalty. However, since the grounds are argumentative in nature, we do not consider it proper to reproduce the same in this year.
4. Shri K.K. Pandey, adv. appeared on behalf of the assessee, whereas Smt. Reema Hota Singh, learned senior Departmental Representative represented the Department.
5. On perusal of the assessment order and the penalty order, it is found that the assessee had introduced capital during the year at Rs. 2,86,000. The AO required the assessee to explain the source. The assessee could explain the source by stating that Rs. 1.80 lakhs was taken from Manager Trading Corporation as loan. To substantiate its version, copy of accounts of Manager Trading Corporation along with photocopy of cash book was furnished. Regarding the balance capital, it was stated that for asst. yr. 1988-89, the assessee had capital of Rs. 1,56,517, which comprised of sundry debtors and cash in hand and fixed assets. It was also stated that the dues from several concerns were also realized and fixed assets were sold at Rs. 38,719. These amounts were stated to be at Rs. 1 lakh and it was explained that the capital introduced in the business under consideration included this amount. The assessee was farther required to furnish the complete details of dues realized, the assets sold and other details. After going through the details of balance sheet for asst. yr. 1988-89, the AO found that the sundry debtors were shown at Rs. 55,382. Cash in hand was shown at Rs. 11,331 and cash at bank at Rs, 802. It was also found that the assessee had not filed return for asst. yr. 1989-90. After considering all the circumstances, the AO observed that the complete details of realization of dues and sales of assets could not be filed by the assessee. In the absence of documentary evidence regarding realization of dues and sale of assets, the assessee preferred to surrender Rs. 35,000 for addition under Section 68 of the IT Act, 1961, due to unexplained cash credit in the capital account of the assessee. The addition of Rs. 5,000 was also made as income from other sources. Accordingly, addition of Rs. 35,000 was made by the IT'O. While completing the assessment order, the AO also initiated penalty proceedings.
6. During the penalty proceedings in response to show cause notice, the assessee submitted that Rs. 35,000 were received on realization of assets on her erstwhile proprietary concern Krishna Oil & Chemicals and hence the capital invested by her in M/s Krishna Detergents may be treated as explained. The reply of the assessee was found to be silent in respect of Rs. 5,000. So far as the reply in relation to Rs. 35,000 is concerned, the AO did not accept the explanation of the assessee and observed that since the assessee was unable to give details of realization of assets and left with no opinion, he surrendered the amount. It is presumed that the assessee had introduced undisclosed income into the business which implies that she has concealed particulars of her income. On this basis, the penalty under Section 271(1)(c) of the Act was levied by the AO.
7. In appeal, before the learned CIT(A), it was contended that the assessee had not concealed any particulars of her income and that the addition of Rs. 35,000 was agreed to in view of the absence of complete documentary evidence in order to purchase peace, which did not amount to concealment of income. The learned CIT(A), however, upheld the penalty by observing as under :
"3. I have considered the facts of the case carefully and gone through the relevant record also. The admissions made by the appellant for inclusion of Rs. 35,000 and Rs. 5,000 to her total income do not appear have made voluntarily as has been made out. It is only when the appellant was unable to explain with proper evidence the claims made by her during assessment proceedings that she agreed to surrender the two amounts in the absence of any other way out. In such circumstances, when the appellant herself surrendered the amount and agreed that they be treated as income from undisclosed sources, the onus on the Department stood discharged. I am supported in this view by the Delhi High Court decision report in (1973) 92 ITR 513. Under these circumstances, the penalty imposed is hereby upheld."
8. Before us, Shri Pandey, learned counsel for the assessee submitted that the assessee had agreed for addition only to purchase peace and the surrender of income under the circumstances of this case cannot lead to the inference that the assessee had concealed income. According to him, mere surrender of such income is not sufficient to impose penalty and many more is needed for imposing penalty. It was further submitted that if a higher income is estimated, it does not amount to concealment of penalty.
9. Learned counsel also made reference to the following case laws :
(a) CIT v. Suresh Chandra Mittal (2000). 241 ITR 124 (MR);
(b) CIT v. S. Sankaran (2000) 241 ITR 825 (Mad);
(c) CIT v. Jugal Kishore Har Gopaldas (2000) 243 ITR 220 (Ker);
(d) Juma Bhai Prem Chandra (HUF) v. CIT (2000) 243 ITR 812 (Gau);
(e) CIT v. Jainarayan (2000) 245 ITR 151 (All);
(f) CIT v. Jaiaram Oil Mill (2002) 253 ITR 192 (Guj);
(g) CIT v. Ajaib Singh & Co. (2002) 253 ITR 630 (P&H);
(h) CIT v. Garg Traders (2002) 253 ITR 736 (P&H);
(i) CIT v. Ravail Singh & Co. (2002) 254 ITR 191 (P&H); and
(j) CIT v. Dhillan Rice Mill (2002) 256 ITR 447 (P&H).
10. On the other hand, the learned senior Departmental Representative, Smt. Reema Hota Singh, submitted that the assessee has introduced undisclosed income and once the assessee surrendered the income, the onus of the Department stood discharged. According to her, penalty flows from the admission and surrender by the assessee. In support of her arguments, the assessee placed reliance on the following decisions :
(i) India Sea Foods v. CIT (1978) 114 ITR 124 (Ker);
(ii) CIT v. E.V. Rajan (1985) 151 ITR 189 (Mad); and
(iii) H.V. Venugopal Chettiar v. CIT (1985) 153 ITR 376 (Mad).
11. We have carefully considered the facts and circumstances relating to this matter, the material to which our attention was invited and the rival submissions. As stated above, the assessee surrendered the income during assessment proceedings, only when she could not adduce documentary evidence to explain the source on account of sale of assets and realization of debts. Thus, the assessee had explained the source, but since the Department was not satisfied and further since it was not possible for the assessee to adduce documentary evidence, she surrendered the amount of Rs. 35,000 only to purchase peace with the Department. In the case of CIT v. S. Shankaran (supra), the assessee had filed a return admitting an income of Rs. 11,710 in asst. yr. 1973-74. The assessee had also reported cash deposits ranging from Rs. 13,000 to Rs. 8,000 in the names of three individuals. It was his case that he had borrowed those amounts from these persons for the purposes of business. He had also claimed that interest of Rs. 1,490 was paid on those loans. The ITO called upon him to explain the new credits and to produce the books of accounts. After the receipt of the letter of the ITO, the assessee admitted that the amount shown as borrowings were to be assessed as part of his income. The assessee's explanation was that it was not possible for him to ascertain the present whereabouts of those individuals and to produce further documentary evidence to establish that those persons have given loans to the assessee. This prompted the AO to hold that the assessee was guilty of concealing his income. He, therefore, proceeded to levy penalty. The penalty so levied was set aside by the AAC. The Tribunal upheld the order of the AAC. Before the Tribunal, it was contended for the Revenue that the act of the assessee agreeing to treat the alleged loans as his own income was sufficient to hold that the assessee had concealed the income. The Tribunal held that by that single act of the assessee without anything more and without any other material placed by the Department to sustain the finding of concealment, the assessee could not be regarded as having concealed his income. The Hon'ble High Court of Madras upheld the view taken by the Tribunal by observing as under :
"In our opinion, the Tribunal has rightly held so. "Concealment" involves necessarily the intention to withhold the truth and to mislead deliberately. It cannot be said that there is concealment even when all the figures had been reported and included in the assessment and even before any investigation made by the Department had shown prima facie that the assessee had been dishonest in reporting the income. The inference sought to be drawn by the ITO from the admission of the assessee that the amount shown by him as loan, and that it be treated as part of his income, could not extend any support for holding that there was concealment of income attracting penalty. The Department had no material with it whatsoever to show that the assessee had acted in a dishonest manner with a view to conceal the real facts. It was not the case of the Department that those persons are non-existent or that those persons had not advanced the loans. The assessee, on the other hand, had stated that those persons could not be traced and, therefore, he is not in a position to produce the documentary evidence to substantiate the statement that the amounts had been obtained by him as loans from them." 12. In the case of CIT v. Jugal Kishore Hargopaldas (supra) the Hon'ble High Court of Kerala has considered the issue and has laid down the following principles :
"In the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT (1987) 168 ITR 705 (SC), the Supreme Court has not laid down any general principle that whenever there was an agreed addition there could be no levy of penalty or that the assessee is not required to explain the source of investmentsor credits. The actual position in law is that merely because the assessee had agreed to the assessment that cannot bring in automatic levy of penalty. If the assessee offers an explanation, the Revenue authorities have to consider the acceptability of the explanation and pass necessary orders. If the explanation is found acceptable, notwithstanding addition made by treating the amount as income from undisclosed sources penalty may not be levied. But if the explanation is vague or fanciful then certainly it is open for the Revenue to impose penalty."
13. Since in that case, the Tribunal had not recorded any finding of factual aspects and acceptability of the explanation of the assessee, the case was remanded back to the Tribunal for re-decision.
14. The issue relating to concealment of income on account of agreed addition was also considered by the Hon'ble Supreme Court of India in the case of CIT v. Suresh Chandra Mittal (2001) 251 ITR 9 (SC). In that case, the assessee had originally filed return showing meagre income. As the action under s, 132 of the IT Act, 1961, was taken against the assessee and thereafter a notice under Section 148 was served on him, he filed revised returns showing higher income. Eventually, assessment orders were passed and the returns submitted regularized under Section 148. In penalty proceedings under Section 271, the assessee claimed that he had offered additional income to buy peace of mind and avoid litigation, Penalty orders were passed and the CIT(A) confirmed the orders. But the Tribunal held that the Department had not discharged its burden of proving concealment and had simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith, and that penalty could not be levied. On a reference, the High Court held that no penalty could be levied for concealment (2000) 241 ITR 124 (MP) (supra). The Department preferred appeals to the Supreme Court. The Supreme Court dismissed the appeals holding that no interference with the order of the High Court was called for.
15. Thus, in view of the above referred decisions, it is clear that if the assessee had given explanation and on non-acceptance of such explanation, the assessee had agreed for addition just to satisfy the IT authorities or agreed for addition under compelling circumstances, merely to buy peace, then only on the basis of such agreed addition or surrender of income, it cannot be held that the assessee had concealed income. Under such circumstances, it is further obligatory on the part of the Department to show by some other material that the assessee had concealed particulars of his/her income.
16. The learned senior Departmental Representative has placed reliance on some of the decisions, which have been referred to above, but on facts these are found to be distinguishable. In the case of H.V. Venugopal Chettiar v. CIT (supra), the assessee had admitted the value of house at Rs. 50,000, whereas the Inspector of Income-tax estimated it at Rs. 98,000. The IT Department issued notices for three assessment years, but before the notices could be served, the assessee filed returns purporting to be revised return in which he included a sum of Rs. 15,000 each for three assessment years. The assessee had also admitted the cost of the house at Rs. 95,000 as against the original cost of Rs. 50,000 already admitted by him. Under these circumstances, after reassessment for the three years, the penalty proceedings were initiated. Under these circumstances, it was held that the admission made by the assessee at the stage of reassessment proceedings had not been retracted and, therefore, it was not necessary for the Department to make any independent inquiry to find out whether, there was, in fact, any suppression due to any dishonest intention on the part of the assessee. In the instant case, the assessee had surrendered the income of Rs. 35,000 about which originally very cogent explanation was submitted by her and it was only when the documentary evidence demanded from her, could not be filed, that she felt compelled to make the surrender. Thus, the facts of the present case are distinguishable from the case of Vengopal Chettiar, in which case, in fact, no explanation was given by the assessee rather the cost of construction was outrightly admitted and revised returns were filed even without service of notice.
17. In the case of CIT v. E.V. Rajan (supra), the assessee, a film producer, filed return disclosing income of Rs. 6,955. During the search proceedings, some incriminating documents were seized from his premises. On compiling the entries in the note books seized with the regular books of accounts maintained by the assessee, it was found that the assessee had shown some excess expenditure in the regular books. From that it was inferred that the claim for acceptance were inflated to the extent of Rs. 32,275. The ITO also found that in the regular accounts, there was a deficit of Rs. 15,868 when compared with the note book No. 5. Thus, the amount of Rs. 50,000 was added on account of the differences. Under these circumstances, the penalty imposed under Section 271(1)(c) of the Act was found to be justified by the Hon'ble High Court of Madras. It may be pointed out that, in this case, the additions were made on the basis of documentary evidence found during the course of search, whereas in the present case, no document was found to make addition. Thus, this case is also distinguishable from the present case.
18. In the case of India Sea Foods v. CIT (supra), the assessee had agreed to treat a sum of Rs. 7 lakhs as income from undisclosed sources and on the basis of such admission, the addition of Rs. 2,84,727 was made as income derived by the assessee from undisclosed sources. Simultaneously, penalty proceedings were also initiated. The Tribunal in that case rejected the contention of the assessee that in the absence of any addition, concealment of income is not established and the Tribunal held that the penalty was imposable. The approach of the Tribunal was held that the penalty was imposable. It may be pointed out that in that case the assessee had not tendered any explanation rather a plain admission was made by the assessee and on the basis of such plain addition, the addition was made to the income.
19. In view of the above, the cases on which reliance has been placed by the learned senior Departmental Representative are found to be distinguishable.
20. After considering the entire material and in particular, explanation tendered by the assessee during the course of assessment proceedings, we are of the considered opinion that the assessee had made surrender only to purchase peace with the Department and after being compelled by the ITO as appears from the circumstances of this case. Hence, in our view, it is not a fit case for imposition of penalty, because the concealment of income or particulars of income, is not found to be established from the material on record and the Department has also failed to prove by independent material that the assessee had concealed her income or particulars thereof.
21. So far as the addition of Rs. 5,000 is concerned, although about this addition, no explanation was submitted by the assessee during the proceedings of penalty, but from the assessment order, it is found that this addition has also been made just on estimate basis and it- cannot be said that it represents or discloses concealed income; hence penalty is not leviable on the basis of this agreed addition of Rs. 5,000.
22. In view of the above, we are unable to uphold the view taken by the learned CIT(A) and set aside her order. Thus, the penalty of Rs. 15,000 is cancelled.
23. In the result, the appeal is allowed.