TaxTMI 
TaxTMI 
1989 (8) TMI 116
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.... book, the assessee told the authorised officer that at his house about Rs. sixty thousand would be available, out of which about Rs.38,700 is the cash balance of his shop. In proceedings under sec. 132(5) the assessee explained that the cash consisted of Rs.38,766.45 being the closing cash balance of the business Bengal Sweet House as on31-10-1978, and Rs.30,000 belonged to his mother Smt. Radha Devi. The lady was also living in the same house and during the search, a will dated 1st of August, 1976 purporting to be executed by her was also found. By this will the lady claimed to own Rs.30,000 in cash and 400 gms.of jewellery. Regarding jewellery the explanation offered by the assessee was that 400 gms. of jewellery belonged to Smt. Radha Devi, the mother of the assessee and the rest belonged to Smt. Maya Gupta, the assessee's wife. 5. Regarding the F.D.Rs they were as under : (i) F.D.R.dated27-12-1974for Rs.10,000 in the name of Km.Suman Gupta, the daughter of the assessee. (ii) F.D.R. dated14-10-1977in the name of the assessee for Rs.25,000. (iii) F.D.R. dated27-10-1977for Rs.20,000 in the name of assessee. (iv) F.D.R. dated27-10-1977for Rs. 15,000 in the name of s....
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....1979, i.e., more than a year after the search the assessee moved an application to the Commissioner for settlement, offering a sum of Rs.1,20,000 for taxation by spreading the same in 5 years, i.e., assessment years 1975-76 to 1979-80 and stating, "I have duly explained to the Income-tax Officer the various sources of possessing cash, fixed deposit receipts, bank balances, jewellery etc. I had made the humble attempt to explain these points to the satisfaction of the learned Income-tax Officer by which he does not appear to be satisfied on all the accounts. I have my genuine belief that I was put to hardship without appreciating my petty status as small shopkeeper. The loans were secured for purchase of house out of which FDR of Rs.70,000 were purchased. Since the negotiations prolonged in uncertain manner, the jewellery as per the valuation report belong to my wife and mother and cannot be regarded as excessive to what a Bania family should possess in hands of two married ladies. I have neither the source nor the strength for protracted litigation with the Income-tax department and therefore, want to buy peace. I am approaching your honour to kindly intervene and do a justice in m....
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....Rs.10,109 " 1978-79 Rs. 8,593 " 1979-80 Rs.10,958 13. The assessee appealed to the Commissioner of Income-tax (Appeals) who disposed of the appeals by a consolidated order dated30-7-1986and dismissed them. It was contended before the learned CIT(A) that the department had, while settling the case, committed itself not to levy any penalty and that the onus to prove concealment lay on the department and had not been discharged. The learned CIT(A) did not record any finding on the first contention and held that concealment of income by the assessee was patent. He accordingly confirmed the penalties. The assessee is now before us in these appeals. 14. The first contention raised before us is that the assessee made the offer of settlement subject to the condition that no penalty shall be levied and this contention had been accepted. Therefore, according to the assessee no penalty should be levied. This plea, in our opinion, is not sustainable. A copy of the petition for settlement has been placed before us at pages 25 to 27 in which there is certainly a request made that no penalty be levied or prosecution launched. But this was not stated as a pre-condition for settlement. ....
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....personal nature and not an official assurance. If the assessee wanted to make this as a condition for agreeing to settlement, it was his duty to procure an assurance in writing. We are of the view that no assurance, as way have any legal effect, was ever given to the assessee and we hold accordingly. The first contention of the assessee, therefore, fails. 16. The next contention raised on behalf of the assessee is that no concealment of income on the part of the assessee is established and hence no penalty is leviable. According to the learned counsel for the assessee, the assessee's explanation about the assets found during the search was bona fide and he had disclosed all material facts regarding the computation of his income. Hence the assessee's case fall within the proviso to Explanation 1 to sec. 271(1)(c) and, therefore, the presumption of concealment created by Explanation-I stood displaced and the burden shifted to the Revenue to prove that the assessee did conceal the particulars of his income. The learned counsel for the assessee took us through the various averments made by the assessee explaining the sources of the things found and also to the assessment orders and ....
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....her the assessee was unable to substantiate any explanation, (iii) whether the assessee's explanation was bona fide and all the facts material to the computation of his income had been disclosed. 19. Before proceeding further, let us see what the Income-tax Officer finds in the assessment orders and the penalty orders. The ITO has discussed the facts in the assessment order for 1977-78. In the other orders he has merely followed his findings for assessment year 1977-78. Therefore, we reproduce below the assessment order for 1977-78 : "Assessment was originally completed in this case on2-9-77on a total income of Rs.13,160. The assessee business and residential premises were searched under sec. 132. During the course of search cash of Rs.60,339 and FDR of the value of Rs.70,000 were seized. It was also found out that the assessee has purchased a house No. J-168,RajouriGarden,New Delhifor a sum of Rs. 1,30,000. Total cash found was Rs.1,30,000 Rs.67,762 out of which Rs.60,000 only was seized. The matter was examined, order u/s 132(5) was passed. Regarding the total amount of cash found, it was stated by the assessee that a sum of Rs.38,766 represents his cash balance as per a/c ....
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....s per settlement with the CIT as discussed above 30,000 ----------- 47,838 Less: Deduction under sec. 80-C 4,678 ----------- Total income : 43,160 ----------- Assessed. Issue necessary forms. Penalty proceedings under sec. 271(1)(c) has been separately issued, penalty notice u/s 10(2) of CDS Act have already been initiated. (B.L. Gupta) Income-tax Officer Dated :11-3-1980. Distt. VII(1),New Delhi" 20. The penalty orders for all the years are almost identically worded and hence we reproduce the penalty order for 1977-78 as below :--- "Original assessment in this case was made on an income of Rs.13,160 on3-9-77. Premises of the assessee was searched on1-11-1978when the following valuables were found :--- F.D.Rs Rs. 70,000 Cash Rs. 68,872 Jewellery Rs. 30,000 Investigations were launched and the assessee filed an application for settlement before the CIT, Delhi-V,New Delhiand offered an addition of Rs.1,20,000 spread over 5 years. The CIT, Delhi-V, New Delhi accepted the petition of the assessee and agreed to an addition of Rs.1,20,000 spread over 4 assessment years, i.e., 76-77 to 79-80. Assessment was made on an income of Rs.43,160 on ....
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....rcumstances that after being cornered from all sides the assessee came out with a petition of settlement and the case was thus settled. It was in pursuance of this settlement that assessee filed the revised return of income and ITO completed assessment. The assessee has concealed particulars of income amounting to Rs.30,000 and has furnished explanation which was found to be false, and it could not be substantiated by him. Assessee's case for levy of penalty is thus covered by Explanation-IA under clause (iii) of section 271(1)(c) of the I.T. Act, 1961 and I impose a penalty of Rs.10,109. This order is issued with the prior approval of the IAC, Range VB,New Delhi. Issued. Necessary forms. (Thakar Das) Income-tax Officer, Dated :20-3-1982. Distt. VII(1),New Delhi." 21. A perusal of the above orders would show that they are based on some tentative conclusions arrived at in investigations u/s 132(5) of the Act. So far as the assessments are concerned no findings were arrived at after giving the assessee an opportunity of controverting adverse material, if any. It is further clear from the assessment orders that in view of the offer of settlement, the ITO did not proc....
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....tolas were found and were not seized. Even this important document (Annexure-D to Panchnama) does not mention whether the ornaments appear to be made of gold or silver etc. Anyway, before us the jewellery was supposed to consist of gold ornaments only and the basis for the quantity is said to be a valuation report found during the search. The assessee's explanation was that about 400 gms. belonged to his mother and the rest of his wife. In the order u/s 132(5) the explanation about 400 gms. was accepted and only 600 gms. was treated as unexplained. No finding about the assessee's explanation has been recorded either in the assessment order or in the penalty order. The ownership of Radha Devi in respect of about 400 gms. of jewellery finds support from her statement and which have been discussed above. In his petition under sec. 132(11) to the Commissioner the assessee had asserted as under :--- "17. The sources of the acquisition of jewellery by my wife are followings : (i) From her parents at the time of her marriage in the year 1962. About 25 tolas (ii) From my mother on the occasion on my marriage About 25 tolas (iii) From my uncle Sh. Ram Parsad and other relatives.....
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....s not been doubted. Even during the search blank stamp papers worth Rs.10,400 were found and in his statement recorded on the date of search itself, the assessee stated that they were purchased for getting a sale deed of house No. J-160,RajouriGardenexecuted. Therefore, the theory of raising loan and depositing the unutilised amount in bank is not unnatural and finds support from the attending circumstances. During the proceedings the assessee did file a confirmation certifying that they had deposited Rs.50,000 with the assessee at an interest rate of 12%. A copy thereof is at page 41 of the paper book. The certificate shows that S.P. Kuchhal & Sons is an income-tax assessee with ITO, Muzaffarnagar and mentions the permanent account No. The party has been found to be existing. In proceedings u/s 132(5) the party (S.P.Kuchhal & Sons) was summoned and they attended with their books of accounts. The books supported the case of assessee but the ITO states in the assessment order for 1977-78 that on investigation, it was found that M/s. S.P. Kuchhal and Sons were mere name lenders and doing Hawala business. What was the nature of investigation and what were the facts found in investigat....
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....d revised returns it means that the assessee concedes the concealment and penalty has to be levied. It was also contended that by making the offer of surrender the assessee cut short the investigation, which the ITO would have otherwise undertaken. As regards the surrender of certain amounts, i.e., agreeing to be assessed on certain amounts it is now almost settled that penalty cannot be levied merely because the assessee agrees to be assessed on a particular amount unless it is shown that the amount was the income of the assessee for the relevant year. In Krishan Lal Shiv Chand Rai v. CIT [1973] 88 ITR 293, the Punjab & Haryana High Court held that the onus was on the department to positively prove that besides the factor of surrender the amounts in dispute were the undisclosed income of the assessee. The surrender by the assessee could have been for more than one reason. In CIT v. Vinaychand Harilal [1979] 120 ITR 752 (Guj.) it was held that admission by the assessee before the AAC that a property belonged to him does not amount to admission that it was income of the relevant year and such admission was not sufficient for the levy of penalty. In CIT v. Mansa Ram & Sons [1977] 106....
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....sessee has been taken on25-10-1979. The Settlement Petition was moved thereafter and this circumstance too must have acted as a complainant on the assessee to induce him to suffer some tax even if it was not legally assessable. If in such compelling circumstances a person in order to make an attempt to buy peace agrees to be assessed on certain amount without admitting having earned any income, he cannot be burdened with penalty under sec. 271(1)(c) unless the Revenue proves actual concealment. In this case there is complete lack of evidence of concealment and therefore, the penalties in question could not have been imposed. 30. The learned CIT (A) has in his order referred to Explanation-2 to sec. 271(1)(c) and section 271(1A) and has stated that the appellant's case was covered by the said Explanation. The said Explanation had no application whatsoever to the facts of the case. Sub-section (1A) of section 271 applies to a case where penalty is imposable by virtue of Explanation-2 to sec.271(1) and permits initiation of penalty proceedings in respect of an earlier assessment year for which assessment had already been completed. Explanation-2 says that where the source of any re....