TaxTMI 
TaxTMI 
2009 (8) TMI 761
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....uch transactions were bogus and, hence, amount of share capital (including share premium) was surrendered as income to buy peace and to avoid protracted litigation. The AO initiated proceedings under s. 271(1)(c) of the Act wherein the assessee contended that mere fact of agreement to include certain amounts as income for a particular year would not "ipso jure" a ground in holding the same as concealed income particularly when such amount was surrendered merely as an income and not as a concealed income. The AO, however, held that the surrender of the said amount established it beyond doubt that the assessee had concealed particulars of its income while filing the return of income and the same would not have been surrendered if the AO would not have made the inquiries. Thereafter, the AO, relying on cl. (b) of Explanation to s. 271(1)(c) held that the assessee failed to submit necessary documents, hence, the explanation offered could not be considered as bona fide. The AO also distinguished the decision of the Hon'ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal (2001) 170 CTR (SC) 182 : (2001) 251 ITR 9 (SC), relied on by the assessee for the reason that, in the pres....
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....d vexed litigation and there was no material on record which could show that the AO disbelieved this explanation of the assessee in the course of assessment proceedings, hence, action of the AO in the course of penalty proceedings not treating such explanation as bona fide was not justified. The learned counsel for the assessee contended that in view of the subsequent decision of the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR (SC) 308, this amount could not be treated as undisclosed income of the assessee at all, hence, how the said surrender could amount to concealed income. It was further contended that in the course of penalty proceedings, the AO did not make efforts to gather any material/evidence to show that the assessee had concealed the particulars of income or submitted inaccurate particulars thereof. It was also contended that there was no direct evidence or circumstantial evidence on record which could prove that the assessee had introduced its unaccounted income in the form of bogus cash credit in this manner. The learned counsel for the assessee further submitted that even on date these companies were shown as shareholders of the ....
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....ssee company raised capital from three companies by issuing shares to them at premium. The AO during the course of assessment proceedings made enquiries regarding the genuineness of such transactions. The AO, in this process, recorded statement of one of the directors of the company who stated that such transactions were bogus and agreed to offer amount of such share capital as income. The assessee company, thereafter, vide letter dt. 11th Dec., 2006, surrendered the same as additional income and paid taxes thereon. The AO levied penalty under s. 271(1)(c) on the same @ 150 per cent of tax sought to be evaded. On appeal, the learned CIT(A) deleted the same. In this factual background, we find that there are documentary evidences like confirmatory letters, mode of payment through banking channels on record to show that the amount in question was given by the respective shareholders. It is also noted that said addition has been made by the AO merely on the basis such offer made by the assessee in the course of assessment proceedings which may be relevant for penalty proceedings but surely it cannot be a conclusive evidence to justify the levy of penalty under s. 271 (1)(c). It is a s....
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....red such amount as its income only to avoid vexed litigation which makes it imperative on the part of the AO to investigate the matter further in the course of penalty proceedings to bring such addition in the net of real income of the assessee. In this regard, we further find that it is a case of private limited company where such transactions, generally, take place in an informal manner and various procedural formalities as per the provisions of the Companies Act, 1956, are not complied in a rigid manner. However, the fact remains that in the annual returns filed by the assessee company with the RoC such companies have been shown as the shareholders and, therefore, non-production of the share allotment register and share transfer register, etc., cannot be construed as assessee's failure to prove that its explanation was bona fide. In this regard, we also find that Shri Shravan Kumar Malu, the director of the assessee company, whose statement has been the basis of impugned addition and penalty thereon, while replying to question No. 27 of AO in the course of assessment proceedings stated that apart from him, Shri Poonamchand Malu was also involved in deciding major financial inves....
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....f voluntary surrender by the assessee. The Hon'ble Madhya Pradesh High Court has also held that the act of filing revised return with higher income was done with the view to buy peace with the Department and to come out of protracted litigation and which could be treated as bona fide act in the facts and circumstances of the case. Thus, in our opinion, in case of voluntary surrender of an income after certain action on the part of the AO the penalty under s. 271(1)(c) of the Act cannot be levied merely on this basis as there could be many reasons for such admission or declaration some of which are present in this case as noted earlier. The natural consequence is that mere fact of agreed addition does not result into a conclusion that the amount agreed to be added as income is concealed income. In our view, even though it may be repetition, 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. 11. Another aspect of the matter is that the object of the Act inevitably is the collection of revenue for the State and object of levy of pe....
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....rect as there are specific provisions which provide for non-levy or waiver of penalty. For e.g., under s. 273A of the Act, the learned CIT can waive the levy of penalty under s. 271(1)(c) subject to satisfaction of certain conditions mentioned therein. Similarly, the Settlement Commission under s. 245H of the Act could waive the levy of penalty. Here, it is important to mention that in case of s. 273A, a plea could be taken by the Revenue that it is because of voluntary disclosure of true income by the assessee without being detected by the Department. However, under s. 245H, it is not so because in that case. the assessee prefers for settlement after various additions being made in the course of assessment proceedings. To further elaborate on this point, we may refer to Expln. 5 of s. 271(1)(c) as applicable to search proceedings taken place before 1st June, 2007 whereby also penalty under s. 271(1)(c) cannot be levied in search cases, if the assessee discloses its income and pays tax thereon as provided therein. In case of search conducted after 1st June, 2007, similar provisions have been made under s. 271AAA of the Act. Similarly, in case of block assessment proceedings, the as....
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....s and answers Nos. 49 to 52, which are reproduced as under, then, it would appear that even the AO appears to be surprised in the manner in which the assessee has agreed to surrender such share capital as income. "Q. 49 As per the minutes of the meeting on 15th March, 2004 at 11 a.m. the allotment has been mentioned but there is no date and Signature of chairman what is the validity of it why it should not be inferred that the minutes have been made afterwards in order to suit or support the transaction you agreed in answer 44? A. Yes I agree we have just taken the printouts and submitted to you. Q. 50 Are you sure the share capital and share premium received from these companies is not genuine? A. Yes. Q. 51 Are you sure? A. Yes, I'm sure. Q. 52 Do you want to say anything else? A. Yes I voluntarily surrender the share capital of Rs. 3 lakhs and share premium of Rs. 27 lakhs received for Logic Infotech Ltd., Pans oft Technologies Ltd. and Nageshwar Investment Ltd. for share allotment on 15th March, 2004. I offer the amount of Rs. 30 lakhs as my additional income for the asst. yr. 2004-05." 13. If this fact is read with the sequence of events and our find....