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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Hon’ble Shri Waseem Ahmed & Shri K.Narasimha Chary
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the revenue is against the order of Commissioner of Income Tax (Appeals)-Central-II, Kolkata dated 10.07.2012. Assessment was framed by A.C.I.T., Central Circle-X, Kolkata u/s 153C/143(3) of the Income tax Act, 1961 (hereinafter referred to as ‘the Act ‘) vide his order dated 31.12.2009 for assessment year 2007-08. The grounds raised by the revenue are as under :
1. That the CIT(A) erred in accepting the assessee’s contention that, page 12 of the bunch of seized document marked UKS-1 did not belong to the assessee ocmpany at all and figures and calculations therein did not reflect any transaction of the assessee company at all and this document was having no evidentiary value.
M/s. Concast Steel & Power Ltd. A.Y.2008-09 1
That the CIT(A) failed to notice that out of 4 amounts identified from above mentioned page-12 as quantum of sales by the AO there was one figure of Rs.67,87,555/- which was same as the gross purchase figure of Rs.67,87,555/- appearing on page 13 of the same set of documents which the assessee confessed to as reflecting it’s own transaciton and also confessed having made cash payment outside books aggregating Rs.21,49,778/- on the basis of entires appearing on that same page-13, and appearance of transaction figure of page 13 in page 12 also conclusively proves that figures mentioned on page 12 reflected transaction done by the assessee company only.
3. That the CIT(A) erred in holding that no penalty u/s 271(1)(c) should have been imposed on acocunt of the additon of Rs.1,17,17,644/- done u/s 69C by the AO relying on unexplained transaction figures appearing on page 12 of seized set documetns marked UKS-1, in the order u/s 143(3)/153C completed on 31.12.2009. 4. That the Departmnet craves leave to add, modify or alter any of the ground(s) of appeal and/or adduce additonal evidence at the time of hearing of the case. “
2. The solitary issue raised by Revenue in all the grounds of appeal is that ld. CIT(A) erred in deleting the penalty imposed by the AO under section 271(1)(c) of the Act.
Before carving out the specific issue let us understand the brief history of the case. In this case a search and seizure operation was conducted at SPS group of companies on dated 14.2.2008. The present assessee is a part of SPS group of companies and it was covered under survey operation under section 133A of the Act. During the search proceedings certain documents were seized and marked as UKS/1 pertaining to the assessee. Accordingly the notice was issued to the assessee under section 15 3C of the Act. During assessment proceedings the page number 5 and 13 of UKS/1 were confronted with the director of the assessee company. The assessee on the basis of seized documents page number 5 and 13 accepted that there were unaccounted cash expenses for Rs. 37,82,356.00 and accordingly made disclosure of Rs.40 Lacs M/s. Concast Steel & Power Ltd. A.Y.2008-09 2 which was shown in the income tax return for the financial year 2007-08 corresponding to assessment year 2008-09.
In addition to the above the AO during the assessment proceedings found some noting on page number 12 of the seized documents UKS/1. As per the noting the assessee was to make a payment for Rs. 2,58,32,531.00 and out of which the assessee made the payment for Rs. 2,55,00000.00 leaving the outstanding balance of Rs. 3,32,531.00. On question by the AO the assessee was able to explain the expenses for Rs. 1.00 crore only and the balance amount of Rs. 1.55 crores remained unexplained. Accordingly the AO was of the opinion that out of the total unexplained expenses of Rs. 1.55 crores, the assessee has already offered the unexplained expenses of Rs. 37,82,356.00 and balance of Rs. 1,17,17,644.00 (1,55,00,000-37,82,356.00) also remained unexplained. As the assessee has already offered a sum of Rs. 40.00 lacs to tax as income from other sources, similarly the balance amount of Rs. 1,17,17,644.00 should be treated as income from undisclosed sources. Finally the AO made the assessment for the year under consideration under section 153C/143(3) of the Act after making the addition of Rs. 1,17,17,644.00 to the total income of the assessee. The AO initiated penalty proceedings under section 271(1)(c) of the Act. The AO accordingly issued notice under section 274 read with section 271 of the Act dated 31.12.2009 for levying the penalty under section 271(1)(c) of the Act for concealing the particulars of income. In response to the notice the assessee submitted that the disclosure of Rs.40 lacs as income from other sources was made to buy the peace of mind. Similarly the assessee did not prefer appeal against the addition made by the AO for Rs. 1,17,17,644.00 to buy the peace of mind. The assessee also submitted that papers seized at the time of search at SPS group of companies do not belong to it. There was also no name of the assessee mentioned in the seized documents. M/s. Concast Steel & Power Ltd. A.Y.2008-09 3 The seized papers were found from the residence of the then director of SPS Steel & power limited, therefore the provisions of section 292C of the Act are also not applied to the assessee. However the AO disregarded the plea of the assessee by observing that : 1) The seized papers were belonging to the assessee company as it was accepted by the Director of the assessee. 2) The concealment was detected after confronting the seized documents before the assessee. On the confrontation and seeking clarification from the assessee rendered no explanation. Therefore there was no option available to the assessee except to confess concealment. 3) The unexplained expenses of Rs.1,17,17,644.00 were not disclosed in the income tax return by the assessee even after the search. The concealment of such expenses was detected by the AO after going through the meticulous and rigorous examination of documents. 4) The assessee made the disclosure of Rs.40 Lacs as income for the assessment year 2008-09 as a result of search and survey operation carried out on the assessee had there been no such survey operation the assessee would not have disclosed the same as its income. The aforesaid facts clearly prove that the assessee was well aware about the unexplained expenses as discussed above. In the instant case the assessee made conscious and deliberate attempt to hide the income in order to avoid the tax. Therefore it is fit case for imposition of penalty under section 271(1)(c) of the Act for concealing the particulars of income. Accordingly the AO imposed penalty on Rs. 1,57,17,644.00 (1,17,17,644+40,00,000.00) at the rate of 100% of the amount of tax sought to be evaded i.e. amounting to Rs. 53,44,427.00 only.
Aggrieved assessee preferred an appeal to ld. CIT(A). The assessee before the learned CIT(A) submitted that the documents marked as UKS/1 were seized from the residence of the director, Shri Uttam Kumar Saraogi, of SPS Steel & M/s. Concast Steel & Power Ltd. A.Y.2008-09 4 Power Ltd. who was neither director nor employee of assessee company. The assessee in the instant case has admitted unexplained expenses of Rs. 37,82,356.00 on the basis of seized documents 5 & 13 of UKS/1 and accordingly made a disclosure of income for Rs. 40 Lacs in the assessment year 2008-09 in its income tax return. The other pages of seized documents were not belonging to the assessee therefore no disclosure was made by the assessee. The page no. 12 of UKS/1 on the basis of which the AO has made the addition for Rs. 1,17,17,644.00 does not belong to the assessee. Even the name of the assessee is not reflecting on the page number 12 of UKS/1. However the assessee has accepted the addition made by the AO to avoid litigation and to buy the peace of mind. It was also submitted that there was brought forward loss which set off the entire addition made by the AO. Therefore as such there was no impact on the income of the assessee except reducing the quantum of brought forward loss. The assessee also submitted that the AO has imposed penalty even on the income of Rs. 40 Lacs which was disclosed in the course of search without considering the fact that due date for filing the return of income under section 139(1) of the Act was not expired for the assessment year 2008-09. The ld. CIT(A) accordingly deleted the penalty imposed by the AO under section 271(1)(c) of the Act by observing as under: “5.5. I am of the opinion that the AO was not justified in treating agreed addition of Rs.1,17,17,644/- as concealed income of the appellant company. consequently, he was also not justified in imposing penalty u/s 271(1)(c) on the said amount. Further, the AO was not justified imposing penalty on sum of Rs.40 lakhs disclosed by the appellant in the course of search because the due date of filing of return was not expired as on the date of search and the appellant company had filed return of income on 30.09.2008 u/s 139(1) of the Act including the income disclosed by him. Thus, in totality of facts the AO was not justified imposing the penalty amounting to Rs.53,42,427/- u/s 271(1)(c) of the Act and the same is directed to be deleted. The ground nos. 1 to 4 are allowed.”
M/s. Concast Steel & Power Ltd. A.Y.2008-09 5
Aggrieved by the order of the ld. CIT(A), the assessee is in 2nd appeal before us. The ld. DR before us submitted that the seized documents were belonging to the assessee as the transactions recorded in those documents were matching with the transactions of the assessing. The ld. DR also submitted that the assessee in the course of assessment proceeding has duly admitted the unexplained expenditure. The ld. DR vehemently supported the order of AO and on the other hand the ld. AR before us submitted that the seized documents do not belong to the assessee other than 5 & 13 of UKS/1 therefore the disclosure of Rs. 40 lacs was made in the return of income. The other additions were accepted to buy the peace of mind and to avoid litigation. As such the assessee did not conceal any income. The ld. AR supported the order of learned CIT(A). We have heard the rival contentions of both the parties and perused the materials available on record. From the foregoing discussions we find that certain documents marked as UKS/1 were seized as a result of search on the SPS group of companies dated 14.2.2008 pertaining to the assessee company. Accordingly the assessee offered a sum of Rs. 40 lacs to tax for the year under consideration on the basis of seized documents 5 & 13 of UKS/1 by disclosing the same in its income tax return. However the AO has made addition for Rs. 1,17,17,644.00 only as unexplained expenses under section 69C of the Act on the basis of seized documents marked as 12 of UKS/1. However the assessee claimed that the seized document 12 of UKS/1 does not belong to it, therefore the addition made on this document was not warranted but. However the assessee did not prefer an appeal against the addition made by the AO just to avoid litigation and to buy the peace of mind. However the AO has imposed the penalty for the concealment of particulars of income under section 271(1)(c) of the Act at the rate of 100% on both the aforesaid amount (40,00,000.00 + 1,17,17,644.00) of the tax sought to be evaded. On appeal the learned CIT(A) deleted the penalty on both the addition made on the ground that there was time to file the income tax return for the assessment year 2008-09 for the addition of M/s. Concast Steel & Power Ltd. A.Y.2008-09 6 Rs. 40 lacs which was duly disclosed in the income tax return. For the other addition of Rs. 1,17,17,644.00 the ld. CIT(A) was of the opinion that seized document number 12 on the basis of which addition was made by the AO is a dump paper and it does not contain the name of the assessee. Now the question before us arises so as to whether the penalty imposed by the AO is within the provisions of section 271(1)(c) of the Act. For the addition of Rs. 40 lacs which was accepted by the assessee at the time of search dated 14.2.2008, we find that the addition pertains to the financial year 2007-08 and the time to disclose the same in the income tax return was available to the assessee. Therefore in our considered view the addition of Rs. 40 Lacs cannot be held as concealment of income. Similarly for the addition of Rs. 1,17,17,644.00 made by the AO on the basis of seized documents no. 12 of UKS/1, we find that even the name of the assessee was not appearing on such document. Therefore it cannot be concluded with the conclusive evidence that it belongs to the assessee. From the finding of the ld. CIT(A) we find that the assessee has not owned up the responsibility of the such documents. The ld. DR has also failed to bring anything on record to the argument of the ld. AR so as ascertain whether these papers belong to the assessee or not. In our considered view the penalty provisions will be attracted only when there are deliberate and conscious acts of the assessee to hide the income to avoid the tax. Simply the assessee has agreed for the addition does not amount to concealment of income. In this connection we are putting our reliance in the order of Hon’ble ITAT Nagpur Branch in the case of ACIT Vs. Malu Electrodes (P) Ltd. 127 TTJ 599. The relevant extract of the order is reproduced below :
“Mere fact of agreed addition does not result into a conclusion that the amount agreed to be added as income is concealed income. In such a case, the AO should further bring some material on record so that it is conclusively established that such surrender, in fact, represented the real income or undisclosed income of the assessee. Generally, the assessee agrees for addition to buy peace and avoid litigation and under bona fide belief that the penalty would not be levied thereafter. It is generally believed that this legitimate expectation of the assessee is not binding M/s. Concast Steel & Power Ltd. A.Y.2008-09 7 on the AO because the assessing authority cannot make a promise against statute. But when there is a discretion with the AO, then, such legitimate expectation should be fulfilled as the principle of estoppel can be applied only when there is no discretion. To put it differently, the AO by not levying penalty under s. 271(1)(c), in such situation will be justified in exercising judicial discretion given to him by the legislature. This is also so for the reason that all the official acts are presumed to be done bona fidely. Further, if the official acts are presumed to be done bona fidely, there appears to be no reason to assume that it is otherwise for the taxpayer. Thus, in this view of the matter, in the case of agreed additions, without going into the technicalities of leviability of penalty under s. 271(1)(c), penalty proceedings should not be initiated. In this regard, it is often said that the concept of plea bargain recognized in US jurisprudence is unknown to Indian law which is not correct as there are specific provisions which provide for non-levy or waiver of penalty. When in case of a search, the assessee declares certain undisclosed income, then, he is saved from levy of penalty. Undisputedly exercise of search and search assessments is more rigorous than assessment proceedings under s. 143(3) in normal course and when an assessee, in those situations, can be exempt from levy of penalty under s. 271(1)(c) there is no reason that in case of agreed additions even though the same may be after some exercise by the AO, penalty under s. 271(1)(c) cannot be waived. Concept of plea bargain is recognized in the IT Act, 1961, in specific situations as well as by giving discretion to the AO to levy or not to levy penalty under s. 271(1)(c), hence, the AO, in case of agreed additions, should not levy penalty under s. 271(1)(c).
Further, if it is assumed that the assessee, in the present case, instead of agreeing for addition would have contested the matter, then, perhaps in view of the decision of the Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR (SC) 308, even addition could not be made or could not have been sustained. Further, such course of action would have made it possible to the assessee to plead various reasons which would have enabled the assessee to get the benefit of doubt. Hence, when an assessee acts in a manner which results into an additional revenue in a smooth manner, then, penalty under s. 271(1)(c) should not be levied which would encourage the assessee to come out clean without fear of penalty or prosecution and that could serve the purpose of provisions of s. 271(1)(c) more effectively.
Mere fact of agreed addition does not result into a conclusion that the amount agreed to be added as income is concealed income; in such a case, the AO should further bring some material on record so that it is conclusively established that such surrender, in fact, represented the real income or undisclosed income of the assessee; on the facts of the case, penalty was not leviable in respect of surrender of share capital as income.”
Similarly we are also relying in the following order of Various Hon’ble Courts and Tribunals. The Hon’ble ITAT, Lucknow in the case of Smt. Brij Bala Choudhry Vs. ITO 82 TTJ 355 has held as under.
“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 M/s. Concast Steel & Power Ltd. A.Y.2008-09 8 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. 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. 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, 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. 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. In view of the above, the view taken by the CIT(A) cannot be upheld Thus, the penalty is cancelled—CIT vs. S. Sankaran (2002) 175 CTR (Mad) 62 : (2000) 241 ITR 825 (Mad), CIT vs. Jugal Kishore Har Gopaldas (2000) 161 CTR (Ker) 74 : (2000) 243 ITR 220 (Ker) and CIT vs. Suresh Chandra Mittal (2001) 170 CTR (SC) 182 : (2001) 251 ITR 9 (SC) relied on; India Sea Foods vs. CIT (1978) 114 ITR 124 (Ker), CIT vs. E.V. Rajan (1987) 61 CTR (Mad) 121 : (1985) 151 ITR 189 (Mad) and H.V. Venugopal Chettiar vs. CIT (1985) 153 ITR 376 (Mad) distinguished.
Assessee could not be said to have concealed her income merely because she surrendered certain amount to buy peace with the Department as she could not adduce documentary evidence in support of her explanation regarding the source of capital or on the basis of another agreed addition which was made simply on estimate basis and, therefore, penalty under s. 271(1)(c) was not leviable.”
From the above we find that in the instant case the AO has made on the basis of the admission made by the assessee of the unexplained expenses during the search proceedings otherwise there was nothing on record to prove the seized document page no. 12 of UKS/1 belongs to the assessee. Even the name of the assessee was not appearing in those documents. The above documents were submitted before us at the time of hearing which are placed on record. From the perusal of the above documents it is not ascertained whether the transactions are reflecting purchase and sales figures of the assessee. The ld. DR has also not anything on record contrary to the arguments of the ld. AR M/s. Concast Steel & Power Ltd. A.Y.2008-09 9 and findings of the ld. DR. In view of above we do not find any reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of Revenue is dismissed.
In the result, revenue’s appeal stands dismissed. Order pronounced in the open court 16 /09/2016