CIT-I LUDHIANA vs. M/S AMIRO INTERNATIONAL

This appeal has been filed under section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) against order dated 20.7.2009 passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘A’, Chandigarh in ITA No.320/Chandi/2008, for assessment year 1990-91, proposing to raise following substantial questions of law:- “i) Whether in the facts and circumstances of the case the Hon’ble ITAT has erred in law in upholding the decision of CIT(A) deleting the penalty levied ignoring the fact that the assessee had furnished inaccurate particulars regarding the sale before the Assessing Officer? ii) Whether in the facts and circumstances of the case the Hon’ble ITAT has erred in law in deleting the penalty when the additions made by the Assessing Officer were not on account of voluntary disclosure by the assessee? iii) Whether in the facts and circumstances of the case the Hon’ble ITAT has erred in law in ignoring the fact that the concealment of income has been duly quantified by the Assessing Officer in the assessment order after due diligence and the assessee had no alternative but to subsequently surrender the sale outside the books of account computed by the Assessing Officer?”

The assessee is a partnership firm engaged in manufacture and export of chain wheels. Against addition to the declared income, matter was taken to the Income Tax Appellate Tribunal, who remanded the matter for giving due opportunity to the assessee. At the time of fresh assessment, the assessee surrendered sales to the tune of Rs.5.15 lacs outside the books of account stating that he wanted to avoid litigation on the issue. The Assessing Officer after making addition on that basis also levied penalty holding that the assessee had furnished inaccurate particulars of income which led to surrender of the sale turnover which amounted to admission of default. On appeal, the CIT (A) set aside the finding on the issue of penalty with the following observations:- “It is settled position of law by now that assessment and penalty proceedings are separate and independent proceedings. Therefore, penalty under section 271(1)(c) could not be validly levied just because any additions have been made at the time of assessment. In the surrender letter of the appellant certain sales have been admitted to be made outside the books of accounts. Though such a statement could be validly made the basis for making addition in a case, this alone could not be the basis for levying penalty under section 271(1)(c). For levying penalty as above, the AO was required to prove that the appellant did make such sales outside the books of accounts. Such evidence was all the more necessary when during penalty proceedings before the AO the appellant was duly contending that no such sales outside the books of accounts were actually made by him and that the addition was admitted just to avoid litigation and to buy peace of mind taking into account the matter being so old and he himself being so old etc. Admittedly such evidence having not been brought on record penalty under section 271(1)(c) could not be levied in the facts and circumstances of appellant’s case. Another aspect of the case brought out by the learned counsel is also quite important. When the entire facts and record was available and even the statement of one person Shri Vijay Jain, to whom the appellant had claimed to make certain scrap sale, was recorded by the Assessing officer in the remand report, the addition made was deleted by the CIT(A). Therefore, the contention of the learned counsel that there was another opinion as per which no such addition was called for is also not without force. Keeping in view that position also when there could be a difference of opinion on the issue of addition itself, there could not be any penalty under section 271(1)(c) in respect of such addition.”

The above view was upheld by the Tribunal.

We have heard learned counsel for the appellant.

It cannot be disputed that issue on which the assessee made a statement admitting sale was a debatable issue and the addition was sought to be made by drawing an inference. In such circumstances, mere fact that the assessee surrendered the amount having regard to the fact that the litigation was continuing for 13 years and he was aged 90, as noted in the impugned order, it could not be held that there was concealment of income. In any case, concurrent finding of fact recorded by the CIT(A) and the Tribunal is certainly a possible view.

No substantial question of law arises.

The appeal is dismissed. (Adarsh Kumar Goel) Judge July 26, 2010 (Rajesh Bindal) ‘gs’ Judge 4