SH. DHEER CHAND SHARMA,NEW DELHI vs. ITO, GHAZIABAD

PER A.T. VARKEY, JUDICIAL MEMBER :

During the course of assessment proceedings, the assessee furnished purchase vouchers, sale vouchers, payment sheets, bank statements, etc. The AO noted that the turnover of the assessee was increased considerably in comparison to the earlier year and he noted that the vouchers produced by the assessee were not fully verifiable since mostly the payments were shown to have been paid by cash and expenses as well as purchases were not fully verifiable. Therefore, he proposed to the assessee why the income of the assessee be not estimated @ 2% of the total receipt/turnover. For that, the assessee replied that assessee had already produced complete books of accounts, bills and vouchers and advance of making payment to the farmers for the purchase of earth soil besides complete evidence of purchase and sale of shares. According to the assessee, it was also stated that gross profit rate is to the tune of 0.36% on the consolidated turnover of Rs.79,05,21,239/- as against the total sales of Rs.37,44,15,104/-. The assessee pleaded that the margin is not to that extent. However, the assessee offered voluntarily to be assessed at a net profit figure of Rs.1,50,00,000/- inclusive of the income declared in the return which works out to approximately 2% of the consolidated sales provided no penalties are levied. The AO completed the assessment on total income of Rs.1,50,00,000/- 3.1 The AO assessed the income of the assessee at Rs.1,50,00,000/- and also issued notice of penalty u/s 271(1)(c) of the Act. The AO in the penalty proceedings pointed out that the tax sought to be evaded was Rs.49,00,935/-and the maximum penalty @ 300% on the tax sought to be evaded came to Rs.1,47,02,805/- and the said penalty u/s 271(1)(c) of the Act was levied by the AO.

“It is a settled law that penalty proceedings are separate and independent and a finding in the assessment order may be an evidence which can be relied but it cannot be conclusive by itself for imposition of penalty. Besides in this case the finding in assessment order is not of concealed income but that of a voluntary surrender and hence cannot be made a sole basis for imposing penalty. Thus, the finding in the assessment order itself does not militate against the stand taken by the assessee that it was a voluntary surrender. In view of the above facts and circumstances we have no hesitation to hold that the assessee made this surrender offer voluntary in peculiar circumstances of this case. Assessing Officer himself accepted it as voluntary offer, reproduced the same in his order and assessed the income on exactly the same amount. There is no reference to any investigation or adverse material. Thus, the assessee’s offer is to be held as voluntary surrender, accepted by the department accordingly. There being no adverse material available on record or any reliance thereon, the observations of assessing officer and CIT(A) about concealment or inaccurate particulars are not borne from the record and the same are contradictory to each other. In view thereof, we delete the penalty imposed on the assessee.”

“8. In the present case, as observed earlier, the Tribunal has relied upon rulings of several High Courts where the voluntary nature of surrender of income to buy peace and the circumstances in which the surrender income could be accepted legitimately, was discussed. In the present case, the assessee did produce all the relevant material in the form of books of account, bank statements, vouchers, sale bills etc. During the course of further enquiry in the assessment proceedings. The assessee voluntarily offered a sum of 75lacs for assessment stating that even though all the material existed, yet in order to buy peace it was offering the amount to tax. The facts of this case are clearly such that the decision in MAK Data (Supra), in the opinion of this Court, cannot be attracted. The assessee at no point seem to have accepted the revenue’s contentions that such claimed expenditure was bogus and that it was not allowable, he offered the amount only to buy peace. There is also no finding by the AO that the appellant had failed to offer an explanation in respect of the income returned or had failed to disclose material particulars.”