Income Tax Appellate Tribunal - Jaipur
Prahlad Rai Agarwal vs Assistant Commissioner Of Income Tax on 4 August, 2003
Equivalent citations: (2003)81TTJ(JP)265
ORDER
R.S. syal, A.M.
1. This appeal by the assessee emanates from the order passed by the learned CIT(A) on 12th Sept., 1996, in relation to the asst. yr. 1993-94 upholding the imposition of penalty amounting to Rs. 49,570 under Section 271(1)(c) of the IT Act, 1961.
2. Briefly stated the facts of the case are that a search was conducted on the assessee, his father and other family members on 3rd Feb., 1993. Certain incriminating documents were found. A sum of Rs. 1,80,000 was seized in cash. A sum of Rs. 1,22,500 was surrendered by the assessee under Section 132(4), The learned AO observed that the total surrendered amount was included by the assessee in his return filed on 16th Aug., 1993, but no tax was paid on the returned income of Rs. 1,74,101. A note was found to have been given in the tax computation sheet for adjustment of Rs. 60,000 out of seized cash against the tax liability. The return was processed under Section 143(1)(a) on 7th Jan., 1994, wherein tax and interest payable was worked out at Rs. 66,457. The learned AO observed in the present penalty order that Shri Surajmal also filed return including surrendered income of Rs. 4,75,000 in which also no tax was paid and a note was given in the tax computation sheet for adjustment of Rs. 1,20,000 out of the seized cash against the amount of tax due. The learned AO made request to the CIT to issue a cheque of Rs. 1,80,000 to be adjusted against the demand in the above two cases. The cheque was received on 25th March, 1994. A sum of Rs. 1,40,023 was adjusted against the demand of Shri Surajmal and the balance amount of Rs. 39,997 was credited in the account of Shri Prahlad Rai, the assessee, resulting into leaving the outstanding demand of Rs. 26,500. Subsequently, Shri Surajmal deposited a sum of Rs. 75,000 in PD account on 29th March, 1994, out of which the balance amount outstanding against the assessee to the tune of Rs. 26,500 was adjusted. Regular assessment under Section 143(3) was completed which included surrendered income of Rs. 1,22,500. Thereafter, the learned AO initiated the penalty proceedings under Section 271(1)(c) of the IT Act, 1961. It was claimed by the assessee that no penalty was exigible in view of the fact that his case was covered under Expln. 5 to Section 271(1)(c) of the IT Act, 1961, which lays down following three conditions for immunity from penalty :
(i) The surrender should be under Section 132(4) during the course of search.
(ii) The appellant should reveal the manner in which such income has been derived.
(iii) Tax and interest is paid on such income.
The learned AO observed that the first two conditions were fulfilled. As regards the third condition i.e., the payment of tax and interest, it was held that since the part amount was recovered later out of money deposited in PD account, therefore, the benefit of Expln. 5 was lost. Taking these facts into consideration, penalty of Rs. 49,570 was imposed by the AO, which was duly confirmed in the first appeal.
3. Before us, the learned counsel for the assessee urged that the assessee had requested, at the time of filing the return, for adjustment of Rs. 60,000 against the total tax demand of Rs. 54,451 as worked out in the computation of total income appended along with the return of income. Our attention was drawn towards copy of return and computation placed at pp. 3 and 4 of the paper book to this effect. It was stated that since the amount of demand was only Rs. 55,451, which was requested to be adjusted against the seized amount of Rs. 60,000, therefore, the condition of payment, as envisaged under Expln. 5, was duly fulfilled. Our attention was drawn towards the order passed by the Chief CIT under Section 119 in connection with the application of the assessee for waiver of interest under Section 234B. While taking us through this order, copy placed at p. 11, it was stated that the Chief CIT had directed the AO to reduce the interest under Section 234B by treating the sum of Rs. 39,997 as having been paid towards the advance tax on the date when the assessee made a request to the CIT for adjustment of the seized cash against the demand. The learned authorised representative further placed reliance on the decision of the Delhi Bench of the Tribunal in the case of Gopalchand Khandelwal v. Asstt. CIT (1995) 52 YTD 661 (Del) holding that where the assessee had applied for adjusting the seized cash against his tax liability, it could not be said that the tax was not paid on the income returned. It was, therefore, urged that the penalty was liable to be deleted.
4. In the opposition, the learned Departmental Representative strongly supported the impugned order and urged that the penalty was maintainable in view of the fact that the amount of tax was not paid. While taking us through the penalty order, it was urged that a sum of Rs. 1,40,023 was adjusted against the tax due from Shri Surajmal, leaving only a sum of Rs. 39,977 available for adjustment with the tax demand of the assessee. It was submitted that since the tax and interest liability of the assessee was computed at Rs. 66,457, therefore, the benefit of Expln. 5 to Section 271(1)(c) of the IT Act, 1961, was not available. It was stated that the subsequent adjustment of tax, after the framing of the assessment out of the PD account from the amount deposited by Shri Surajmal was of no consequence and could not be stated to have satisfied the necessary ingredient of Expln. 5, namely, the payment of tax and interest on the surrendered income.
5. We have considered the rival submissions, at length and perused the relevant material to which our attention was drawn during the course of proceedings. It is an admitted fact that a total sum of Rs. 1,80,000 was seized during the course of search operations conducted on the assessee and his family members. Shri Surajmal, while filing his return, claimed the adjustment of a sum of Rs. 1,20,000 against his tax liability. The return filed by the assessee along with the computation of income clearly reveals, that the assessee had claimed the adjustment of the balance seized cash of Rs. 60,000 against his tax liability computed by him at Rs. 54,451. It transpires that while making the assessment, the AO charged interest and enhanced the total tax liability at Rs. 66,457, leaving shortfall of around Rs. 26,500 after adjusting Rs. 39,977 being the balance amount out of Rs. 1.80 lacs after adjusting the tax liability of Shri Surajmal in entirety. It is noticed that the learned Chief CIT while considering the prayer of the assessee seeking the waiver of interest, directed the AO to treat the sum of Rs. 39,977 as advance tax on the date when he made a request to the CIT for adjustment. Thereafter, it was directed to allow the proportionate relief of interest to the assessee. These facts reveal that the stand of the assessee ab initio was to claim adjustment of Rs. 60,000, being the seized cash against the tax liability as shown by him at Rs. 54,451 (inclusive of surcharge @ 12 per cent amounting to Rs. 5,834). The balance seized cash of Rs. 1,20,000 was claimed adjustable in the hands of Shri Surajmal. It is another thing that while making assessment, the learned AO charged interest and enhanced the tax liability to Rs. 66,000 and odd and thereafter the learned Chief CIT directed the AO to reduce the proportionate interest under Section 234B while admitting that the assessee had made a request to the CIT for adjustment of seized cash against the tax demand. The narration of these facts brings us to the situation that as against the total liability of the assessee, after allowing necessary reduction in interest under Section 234B in terms of the order of the learned Chief CIT, came to an amount lower than Rs. 60,000, being the amount for which adjustment against the tax due was sought by the assessee. It is entirely a different matter that the Department adjusted a sum of Rs. 39,977 against the tax liability of the assessee, whereas the claim of the assessee and Shri Surajmal was to adjust the seized cash at Rs. 60,000 and Rs. 1,20,000 respectively against their tax demand. Suo motu adjustment of the seized cash by the Revenue against the tax liability of two connected assessees in a particular manner, totally disregarding the claim of the assessees for adjustment in a specific way cannot be a ground to put the assessee in a disadvantageous position. In view of these facts, we are satisfied that the condition of Expln. 5 to Section 271(1)(c) of the IT Act, 1961, with regard to the payment of tax and interest on surrendered income stands satisfied. Accordingly, there is no reason for upholding the penalty on this count. We, therefore, delete the sustenance of penalty by the first Appellate Authority.
6. In the result the appeal is allowed.