Judgment:
1.All these appeals are filed by the Revenue and are being directed against the. consolidated order of CIT(A), dt. 26th Feb., 1993.
"1. On the facts and in the circumstances of the case the CIT(A) erred in cancelling the penalty levied under Section 271(1)(c) accepting the assessee's contention that the case gets covered by Expln. 5(1) to Section 271(1)(c) of the Act as note book containing unaccounted transactions are books of account maintained by the assessee for its source of income whereas the AO has proved beyond doubt that these note books were kept by the assessee for his own use and the transactions recorded therein were not found recorded in the regular books of accounts maintained and seized by the Department.
2. On the facts and in the circumstances of the case the CIT(A) erred in deleting the penalty holding that there was no concealment when in fact the assessee had in its possession papers containing unaccounted transactions and undisclosed income at the time of filing the return of income. The CIT(A) failed to appreciate that the income recorded in note books was much more than that disclosed in the return of income. Even the cases cited are distinguishable on facts.
3. On the facts and in the circumstances of the case the CIT(A) erred in cancelling the penalty levied under Section 271(1)(c) accepting the assessee's submission that income surrendered at the time of search matched with the income assessed for asst. yrs.
1986-87 to 1989-90 and, therefore, the assessee is entitled for immunity. The CIT(A) erred in law because immunity was available for asst. yr. 1989-90 and not for earlier asst. yrs. 1986-87 to 1988-89.
4. On the facts and in the circumstances of the case the CIT(A) erred in holding that the income on the basis, of which concealment penalty was worked out was estimated income when in fact the seized papers indicated concrete figures of concealed particulars of income on the basis of which the assessment was reopened by issue of notice under Section 148.
5. The order of the CIT(A) be vacated and that of the AO be restored".
Ground Nos. 1 to 3 raised are common for all these three assessment years involved and ground No. 4 is only in respect of asst. yrs.
1986-87 and 1987-88, 3. For asst. yr. 1986-87, the return originally was filed on an income of Rs. 74,930 on 30th July, 1986, which was revised under amnesty scheme on 30th Jan., 1987, for a income of Rs. 1,74,930. Again during the course of assessment proceedings the assessee filed a re-revised return on 17th March, 1987, on an income of Rs. 83,220. In respect of these returns assessment was completed under Section 143(3) on dt. 31st March, 1987, at Rs. 85,280.
4. A search was conducted at the business premises of the assessee on 28th Feb., 1989, In the course of search action, in the premises of partner Shri Hukamatrai Wadhwa certain documents were seized. The seized material included cash of Rs. 2,55,000 and six Bundles of Rs. 17,14,000.
5. On going through the seized material it was found by the Revenue authorities that the transactions recorded in seized papers were found material for asst. yrs. 1986-87 to 1989-90. The seized papers reflected the income for calender year 1986 (1st Jan., 1986 to 31st Dec., 1986).
Similarly from 1st Jan;, 1987 to 31st Dec., 1987, and were from 1st Jan., 1988 to 31st Dec., 1988. In these documents on one side, total receipts were written and on the other side expenses, investment, etc.
were written.
6. On scrutiny of seized papers for 1986, it revealed that there was a profit of Rs. 10,84,161. On the basis of this detection notice under Section 148 dt. 19th Aug., 1990 was issued for asst. yr. 1986-87. In response to this notice the assessee filed another return declaring income of Rs. 6 lakhs on 10th Oct., 1990, on estimate basis estimating the income as follow : However, after detailed scrutiny of seized papers, the AO assessed total income of the assessee at Rs. 11,68,640 vide assessment order dt.
26th Dec., 1990. A statement of Shri Hukamatrai Wadhawa under Section 132(4) was recorded in which he offered a sum of Rs. 65,00,000 as undisclosed income in the hands of the assessee-firm to be assessed for asst. yr. 1989-90.
7. The return of income originally was filed at Rs. 76,460, the same was accepted under Section 143(1) on 30th March, 1988. On the basis of search as mentioned above, notice under Section 148 was issued to the assessee. In response to the notice under Section 148 a revised return was filed on 17th Sept., 1990, declaring an income of Rs. 14,94,654.
Referring to the seized documents, the income was assessed at Rs. 17,76,650 vide order dt. 26th Dec., 1990.
8. The return originally was filed on 30th June, 1988, declaring an income of Rs. 33,480. On the basis of search a revised return was filed by the assessee on 30th April, 1990, at an income of Rs. 23,08,880. On the basis of seized documents the income was assessed on a total income of Rs. 18,91,040 vide order dt. 27th Dec., 1990.
9. In respect of the appeal for the asst. yr. 1989-90 the facts are that the assessee filed a return declaring an income of Rs. 23,71,594 on 30th April, 1990. Referring to the income declared as per the statement under Section 132(4) amounting to Rs. 65 lakhs the income was assessed at Rs. 66,00,090 vide order dt. 27th Dec., 1990. The above-mentioned assessments were agitated by the assessee in appeals filed before the CIT(A) and the income of the assessee after the order of CIT(A) rested at following figures 10. Following penalties have been imposed under Section 271(1)(c) for the years under consideration on the finally rested assesseable income in the hands of assessee : The validity of levy of penalties is an issue under consideration in these appeals.
11. The learned Departmental Representative narrated the above-mentioned facts. He contended that CIT(A) had wrongly deleted the penalty. The assessments in question were framed on the basis of seized material revealed during the course of search proceedings carried on the assessee. The penalty was levied on the income sustained by the CIT(A) in quantum appeals. The decision of CIT(A) in quantum proceedings was not agitated by the assessee in further appeal.
Therefore, the assessee admitted the assessment of income on which the.
penalty has been levied. He referred to the para 4 of the penalty order which reads as follows : Para 4 "The assessee has further stated that even from the seized material the exact, quantum of income for each year cannot be determined as the seized material contains datas for a calendar year while the income has been assessed on financial year basis and it has been done so after estimating the income for first 3 months of the calendar year and later nine months of another calendar year which also does not prove that the assessee did earn that much income during the year." He contended that the concealment was glaring one. Thus, it was a clear-cut case of concealment 12. On the other hand, the learned counsel of the assessee contended that the assessee had declared an additional income of Rs. 65 lakhs over and above as per return/books of account regularly maintained. He referred to the following figures : He contended that since additional income is more or less same as declared in a statement under Section 132(4) and after appeal there has not been much variation between the offered returned income and assessed income, the case of the assessee falls within the Expln. 5 to Section 271(1)(c) of the IT Act, 1961. He further referred that for asst. yr. 1988-89 the assessee 'had filed the revised return voluntarily even before any notice under Section 148 was issued, In respect of asst. yrs. 1986-87 and 1987-88, he submitted that even from the seized material the exact quantum of income for each year cannot be determined as the seized material contains datas for a calendar year while the income has been assessed on financial year basis and it has been done after estimating the income for last three months of the calendar year latter 9 months on estimate basis only which also does not prove that the assessee did earn that much income during the year.
He in this regard referred to the reply furnished before the AO dt.
12th April, 1992, placed at pp. 198 to 202 of the paper book. He further contended that the AO was wrong in taking view that immunity from penalty under Section 271(1)(c) by Expln. 5 thereof is restricted only for asst. yr. 1989-90 and not for other assessment year, i.e., asst. yrs. 1986-87 to 1988-89.
13. Referring to the submissions made before the CIT(A), he contended that returns of income for asst. yrs. 1986-87 and 1987-88 were filed showing income on estimate basis because no material was there to indicate as to the exact quantum of income for a particular financial year. He contended that the finally assessed income in respect of asst.
yrs. 1986-87 to 1989-90 was in consonance with the income declared by the assessee during the course of search proceedings. The assessments which have been framed are based on the entries recorded in the note books, therefore, the transactions can be said to be recorded in the books of account and, therefore, the case of the assessee is covered by exception to Expln. 5 to Section 271(1)(c). He contended that the AO also completed the assessment on estimate making some changes here and there in the figures shown by the assessee and CIT(A) in quantum proceedings has also given certain reliefs that too on estimate and on the very material on which the assessee filed the return and the AO completed the assessment. Therefore, his income has been computed on estimate basis and penalty proceedings under Section 271(1)(c) thus are not applicable.
14. On the basis of above arguments and facts the learned counsel of the assessee laid down the following propositions and also cited certain case law supporting the said propositions : The appellant offered the undisclosed income in the statement recorded under Section 132(4) of the Act on 28th Feb., 1989," on the arrangement that immunities will be given under Expln. 5 to Section 271(1)(c) of the Act. As a layman, it is not possible for the appellant to know the provisions of the Act as to under what Explanation immunity could be given or whether any immunity could be given at all. Hence, the presumption goes in favour of the appellant that the Department agreed at the time of search proceedings itself that immunities will be given to the appellant from penalties and prosecution.
The offer of the appellant was a voluntary offer on the agreement of immunity and hence penalty levied may be deleted.
(iii) Sir Shadilal Sugar and General Mills Ltd. v. CIT (1987) 168 ITR 705 (SC) (v) Solid Containers Ltd. v. Dy. CIT (ITA No. 4016/M/2001, dt. 21st Dec., 2001).
Respondent is covered by immunity under Expln. 5 to Section 271(1)(c): (i) the respondent has maintained books of account for the source of income disclosed to the Department in the course of the search action; This is evident from the note book/document seized by the Department which contained the entries in the form of assets/liabilities and which is also evident from the assessment orders; (ii) The section refers to books of account for any source of income and not the regular books of account and further, there cannot be any undisclosed income in the regular books of account on which basis the return is filed before the Department; (iii) Books of account is defined in the IT Act 1961, w.e.f., 1st June, 2001, by Section 2(12A) inserted by the finance Act, 2001, to include other books also; (iv) The tax on the disclosure made of Rs. 65 lakhs was Rs. 16,23,300 including surcharge of Rs. 77,300 and the same was paid by way of release of promisory notes seized of Rs. 17,15,000 and cash seized of Rs. 2,55,000 i.e., aggregating to Rs. 19,70,000 which is more than the tax payable.
Income voluntarily declared by the appellant in the revised return of income filed and hence there is no concealment in the return of income filed (i) Mahendra Chimanlal Shah v. Asstt. CIT (1994) 49 TTJ (Ahd) 677 : (1994) 51 ITD 244 (Ahd) (ii) Gulamrasul M Pathan v. Asstt. CIT (1990) 54 TTJ (Ahd) 30 : (1990) 57 ITD 129 (Ahd) (iii) Ami Chand v. ITO (1994) 48 TTJ (Del) 308 : (1994) 49 ITD 606 (Del) (iv) Asstt. CIT v. Dr. T.N. Venkataraman (1995) 54 ITD 594 (Mad) (v) GBH Exporters v. Asstt. CIT (1996) 58 ITD 499 (Jp) (vi) Windsor Exports v. ITO (Bench "D", order dt. 16th Sept.,1992, copy supplied).
Entire issue to be looked from the standpoint of the Revenue's credibility and reliability in the minds of the assessee at large : (i) Ashok Natverlal Patel v. Asstt. CIT (1998) 61 TTJ (Ahd) 139 : (1998) 67 ITR 82 (Ahd) The AO, in his penalty order has not carried out any separate proceedings and the penalty is levied based on the finding in the assessment proceedings, which is not justified and hence the penalty levied needs to be deleted : In statement recorded, income offered for asst. yr. 1989-90, in Section 132(5) order, income assessed for asst. yr. 1989-90. Income for asst. yrs. 1986-87 to 1988-89 offered voluntarily and accepted by Department with minor additions. Department cannot have both i.e., either they rely the statement as a whole and assess the respondent in asst. yr. 1989-90 if they want to assess in individual years, then no relevance be given to statement. Thus, Department cannot rely upon the statement for addition without giving immunity from penalty under Section 271(1)(c) of the Act.
Thus, in totality of facts and circumstances of the case, the penalty has been rightly deleted by the CIT(A) and the penalty order may be upheld, particularly, when the quantum relief given by CIT(A) is accepted by Department by not filing any appeal to Tribunal.
15. We have carefully considered the rival submissions in the light of material placed before us. The assessments in the present case have been framed by taking into consideration the material seized during the course of search. The income which is finally rested after the order of CIT(A) in quantum proceedings is as per subjective satisfaction of the assessee as is evident from the fact that no second appeal was filed against the order of CIT(A) in quantum proceedings. Looking to the facts of the case, the plea of the assessee that assessment has been framed on estimate basis is not correct. The basis of income assessed is the documents found at the time of search. It is not the case of the assessee that income assessed is not the income of the assessee. The revised returns were also filed on the basis of material found in the search and quantified accordingly.
16. Now coming to the contention of the assessee that the addition was agreed one as during the course of search proceedings the assessee agreed for a declaration of Rs. 65 lakhs and the said declaration was acted upon in its letter and spirits as the assessed income of the assessee after giving effect to the order of CIT(A) is also above Rs. 65 lakhs (for asst. yrs. 1986-87 to 1989-90). According to Expln. 5 to Section 271(1)(c), the assessee should be given immunity on the agreed addition. The offer of appellant was a voluntary offer on the agreement of immunity. The reliance in this regard is mainly placed on the decision of Hon'ble Supreme Court in the case of CIT v. Suresh Chandra Mittal (supra). In the said decision the Hon'ble Supreme Court affirmed the order of High Court in the case of CIT v. Suresh Chandra Mittal (supra). The reference has also been made to the decision of Hon'ble Madhya Pradesh High Court in the case of CIT v. Suresh Chandra Mittal (supra). In our view, the decision of Hon'ble Supreme Court cited by the learned counsel of the assessee has no direct bearing on the case of assessee as in the said case it was held by Tribunal that 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. In the said case Department rested its conclusion only on the act of voluntary surrender by the assessee. In the present case there was a solid material with the Department for arriving at a definite income which was not disclosed by the assessee in the returns originally filed. The reliance by the assessee on the decision in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT (supra) is also misplaced for the reasons that it is not the case of disallowance which is in dispute. It is a case of positive concealment detected by the Revenue by way of search from the documents maintained by the assessee. The another reason is that Hon'ble Supreme Court in the case of K.P. Madhusudhanan v. CIT (2001) 251 ITR 99 (SC) have held that by reason of addition of Expln. (1) to Section 271, the view taken by the Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT (supra) can no longer said to be applicable.
17. The reliance on the decision in the case of CIT v. Kiran & Co.
(supra) is also misplaced. In the said case the assessment's were framed by the AO on the sums offered by the assessee which was subject to no penalty. Apart from letter of offer, there was no other material available with the Revenue authorities on the basis of which it could be said that assessee had concealed its income for the relevant years.
In the present case, as it is mentioned earlier, there was ample material with the Revenue authorities in respect of concealed income.
The reliance has also been placed by the assessee on the decision in the case of Solid Containers Ltd. v. Dy. CIT in ITA No. 4016/M/2001 dt.
21st Dec., 2001 (supra). In this regard, we may mention that the facts of the said case of Tribunal were identical with the facts in the case of CIT v. Suresh Chandra Mittal (supra). As already mentioned that the facts of the present case are different to the facts of the case of CIT v. Suresh Chandra Mittal (supra) so the decision of Tribunal is also not applicable to the facts of the case.
18. The another argument of the assessee is that the respondent is covered by immunity under Expln. 5 to Section 271(1)(c). The offer of the assessee during the course of search proceedings was in respect of asst. yr. 1989-90. The Expln. 5 to Section 271(1)(c) speaks as follows : "Explanation 5 : Where in the course of search under Section 132 the assessee is found to be the owner of any money, building, jewellery or other valuable articles or thing (hereinafter in this explanation referred to as assets) and the assessee claims that the such asset have been acquired by him by utilising (wholly or in part) his income,-- (a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein; or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under Clause (c) of Sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, unless,- (1) such income is, or the transactions resulting in such income are recorded,-- (i) in a case falling under Clause (a), before the date of the search; and (ii) in a case falling under Clause (b), on or before such date, in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Chief CIT or CIT before the said date; or (2) he, in the course of the search, makes a statement under Sub-section (4) of Section 132 that any money, bullion, jewellery or other valuable articles or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in Sub-section (1) of Section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income." As it is clear from the language of the Expln. 5 to Section 271(1)(c), the benefit of immunity is only in respect of transactions which are recorded before the date of search in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Chief CIT or CIT before the said date. The contention of the assessee in this regard is that the documents seized in the course of search should be considered to be books of account maintained by the assessee and for that benefit be given to the assessee under the Explanation. We are unable to accept this argument for the reason that the documents seized cannot be said to be the books maintained for any source of income. Firstly, for the reason that for the purpose of disclosing the income the assessee was not relying on the seized documents and secondly, such contention of the assessee is contrary to the very basic intention of the provision. Any such interpretation will be contrary to the provision contained in Expln. 5 to Section 271(1)(c) of the Act.
19. The immunity from penalty has also been sought on the ground that disclosure was made during, the course of search and in view of payments made by way of promissory notes and cash seized no further tax was payable.As already mentioned that provision of immunity given by Expln. 5 to the Section 271(1)(c) is not applicable to the assessee so this argument is also not acceptable.
20. It is also the contention of the assessee that there is no concealment in the revised return. The revised return was voluntary.
For this the reliance has been placed on the various decisions of Tribunal referred to at p. 9 of the order under the head "no concealment in the revised return". In our considered opinion, the fact that the assessee purported to file a "revised return" after its coming to know that the Revenue authorities had information in possession regarding concealed income of the assessee which had not been shown in the original return would not absolve the assessee from culpability under Section 271(1)(c). Since at the time of filing the original return the assessee must be taken to have been aware of its having earned much more income as was declared in the original return, but had nevertheless omitted to disclose the huge income in the original return, the second return filed by the assessee cannot be regarded as a "revised return" filed under Section 139(5) of the Act because there was no discovery by the assessee of any omission or wrong statement having been made by it by inadvertence in the original return.
Therefore, the assessee was guilty of concealment of income under Section 271(1)(c). The submission of the revised return, in the case of assessee may be voluntary, but such voluntary filing by itself does not lead to conclusion that there was no intention on the part of the assessee to conceal its income when it filed the original return. That naturally depends upon the facts and circumstances which throw light on the mental process of the assessee at the time of submission of its original return. Thus, the filing of revised return would not be sufficient to exonerate the assessee from the penalty consequences. It is not the point of time of submissions of revised return that is crucial on the question. The revised return must be one which is permissible under Section 139(5) of the Act and there must be a total absence of fraudulent intention on the part of the assessee at the time of filing of the original return.
21. The levy of penalty has also been agitated on the ground that the penalty and assessment are two separate proceedings and penalty cannot be levied merely on the basis of finding given in assessment order. In this regard, reliance has been placed on the decision of Hon'ble Bombay High Court in the case of CIT v. Dharamchand, L. Shah (supra) and in the case of Sambha R. Lalwati v. ITO (1990) 34 ITD 183 (Ahd). As has been observed earlier that the assessment has been framed on the basis of material in possession of Revenue, the correct income of the assessee, after the assessee has become final and cannot be a matter of conjucture. The case law relied upon by the assessment has no application to the facts of the case as it is not the case of the assessee that the income assessed in the hands of assessee does not belong to it.
22. In view of the position discussed above and taking into account all the facts and circumstances of the case, we are of the opinion that CIT(A) was wrong in cancelling the penalties levied upon the assessee.
We, therefore, reverse the order of CIT(A) and restore that of AO.