SH. RAJESH KUMAR BATRA,SONEPAT vs. ACIT, SONEPAT

ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 20/02/2014 of learned Commissioner of Income-tax (Appeals), Rohtak for assessment year 2010-11. The assessee is aggrieved with the levy of penalty of Rs.4,27,586/- under section 271(1)(c) of the Income-tax Act, 1961 (for short “the Act”) by the Assessing Officer, which has been confirmed by the learned Commissioner of Income-tax (Appeals). The grounds of appeal raised by the assessee are reproduced as under: i. On the facts and in the circumstances of the case and in law the authorities below erred in holding the assessee guilty of concealing the particulars of income and imposing penalty u/s 271(1)(c) of the Act.] ii. The action being arbitrary, erroneous and unjust must be quashed with directions for appropriate relief.

as reproduced above.

8. Before us, the learned counsel of the assessee submitted that amount was surrendered during assessment proceedings to buy peace of mind and to avoid litigation or harassment and on the condition that no penalty would be levied and thus no penalty could be levied in such circumstances. In the support of the contention, the learned counsel relied on the decision of the Tribunal Amritsar bench in the case of Income Tax Officer Vs. Manjit Singh Baldev Singh Commission Agents reported in (1999) 69 ITD 97 (ASR). He further submitted that the assessee had already explained as why the amount in reference was not included while filing return of income and said explanation was bonafide, no penalty could have been levied by the Assessing Officer.

9. The learned Senior Departmental Representative, on the other hand, relied on the order of the lower authorities.

10. We have heard the rival submissions and perused the relevant material on record. Before us, the learned counsel of the assessee has placed reliance on the decision of the Tribunal in the case of ITO Vs. Manjit Singh Baldev Singh commission agents (supra). But we find that in that case the addition based on peak credit was surrendered by the assessee in the assessment proceedings only. But in the present case the assessee had already admitted and surrendered the amount of Rs.17,99,995/- appearing in loose papers impounded during the course of survey action, including the amount of Rs.13,83,775/- on which the Assessing Officer levied the penalty. In the case of present assessee, Department. Thus in our view, the facts and circumstances of the instant case are different from the facts of the case cited by the learned counsel, and thus the ratio of the said decision cannot be applied over the facts of the instant case. In our view, mere raising of a plea of voluntary surrender or buy peace or avoid litigation or amicable settlement is not sufficient for not levy of penalty and the Assessing Officer is required to examine whether the assessee has discharged his burden of proving the bonafide.

11. We find that in the case of the assessee the Ld. Commissioner of Income-tax (Appeals) has confirmed the penalty on the ground that explanation furnished by the assessee was not bonafide, thus the Ld. Commissioner of Income-tax (Appeals) has invoked Explanation-1, of the section 271(1) of the Act. The Assessing Officer, however, has not recorded any finding whether the explanation filed by assessee was bonafide or not. In this regard, we would like to extract the relevant Explanation of section 271(1)(c) of the Act as under: “Failure to furnish returns, comply with notices, concealment of income, etc. 271. (1) ………………………………………………………………………. Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,— (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the 48[Principal Commissioner or] Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.”

1. 1.

14. We find that in the submission before the Assessing Officer, the assessee submitted that while filing the return of income the said amount of Rs.13,83,775/- was not included due to debatable view of inclusion of margin of sales instead of total amount of sales included in the loose papers. The learned Commissioner of Income-tax (Appeals) has not given any reasoning as to why the said explanation was not bonafide. We also find that out of amount of Rs.17,99,955/- appearing in loose papers, the assessee already accepted Rs.4,16,220/- in the return of income filed.

15. Further we find that, in the course of survey action, the survey team found unexplained stock, unexplained cash, unexplained investment in furniture and fixture and unexplained investment in renovation of shop alongwith loose papers indicating sales. In the circumstances, where in the course of search or survey action evidences in respect of source of income and application of income both are found, then addition could have been made either on source of income or application of income and it cannot be made both for source of income and application of income. In the present case, the Assessing Officer in the assessment order has nowhere observed that the assessee was having any source of investment in stock, cash etc other than the sales. In such circumstances, the apparent source of investment in stock, cash, furniture and fixture, renovation in shop etc. is the sales appearing in loose papers and the Assessing Officer should have allowed the telescoping of the income appearing in loose papers against the investment in stock, cash etc. It appears to us that the Assessing Officer has simply made addition for the amount offered by the assessee, without going into whether said addition could have been made in the hands of the assessee or not. It is the statutory duty of the Assessing Officer to assess the income in accordance with law only. We find that the Assessing Officer, even levied the penalty without any finding recorded in the order on the issue whether the explanation filed by the assessee was bonafide or not and whether all material facts related to the addition were disclosed by the assessee.